| Abstract: |
The fight against cartels is a priority for antitrust authorities on both
sides of the Atlantic. What differs between the EU and the US is not the basic
toolkit for achieving deterrence, but to whom it is targeted. In the EU,
pecuniary sanctions against the firm are the only instruments available to the
Commission, while in the US criminal sanctions are also widely employed. The
aim of this paper is to compare two different types of fines levied on
managerial firms when they collude. We consider a profit based fine as opposed
to a delegation based fine, with the latter targeting the manager in a more
direct way. Under the assumption of revenue equivalence, we find that the
delegation based fine, although distortive, is more effective in deterring
cartels than the profit based one. When evaluating social welfare, a trade-off
between deterrence and output distortion can arise. However, if the antitrust
authority focuses on consumer surplus, then the delegation based fine is to be
preferred. |