The Distribution of Harm in Price-Fixing Cases

CentER Discussion Paper Series No. 2008-68

TILEC Discussion Paper No. 2008-030

29 Pages Posted: 3 Sep 2008 Last revised: 14 Sep 2008

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Wieland Müller

Tilburg University - Tilburg University School of Economics and Management

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Date Written: August 15, 2008

Abstract

We consider a vertically related industry and analyze how the total harm due to a price increase upstream is distributed over downstream firms and final consumers. For this purpose, we develop a general model without making specific assumptions regarding demand, costs, or the mode of competition. We consider both the case of homogeneous and differentiated goods markets. Furthermore, we discuss data requirements and suggest explicit formulas and regression specifications that can be used to estimate the relevant terms in the harm distribution in practice, even if elevated upstream prices are rather constant over time. The latter can be achieved by considering perturbations of the demand curve. This in turn can be used to construct a supply curve for the case of imperfect competition that includes perfect competition and monopoly as special cases. Finally, we illustrate how basic intuition from the tax incidence literature carries over to the distribution of harm.

Keywords: cartel, abuse of a dominant position, pass on defence, apportionment of harm, supply curve, tax incidence

JEL Classification: D43, L42, L13

Suggested Citation

Boone, Jan and Müller, Wieland, The Distribution of Harm in Price-Fixing Cases (August 15, 2008). CentER Discussion Paper Series No. 2008-68, TILEC Discussion Paper No. 2008-030, Available at SSRN: https://ssrn.com/abstract=1262173 or http://dx.doi.org/10.2139/ssrn.1262173

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Wieland Müller

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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