| Abstract: |
In most jurisdictions, antitrust fines are based on affected commerce rather
than on collusive profits, and in some others, caps on fines are introduced
based on total firm sales rather than on affected commerce. We uncover a
number of distortions that these policies generate, propose simple models to
characterize their comparative static properties, and quantify them with
simulations based on market data. We conclude by discussing the obvious need
to depart from these distortive rules-of-thumb that appear to have the
potential to substantially reduce social welfare. |