David Bartolini

Are Antitrust Fines Friendly to Competition? An Endogenous Coalition Formation Approach to Collusive Cartels

A well-established result of the theory of antitrust policy is that it might be optimal to tolerate some degree of collusion among firms if the Authority in charge is constrained by limited resources and imperfect information. However, few doubts are cast on the common opinion by which stricter enforcement of antitrust laws definitely makes market structure more competitive and prices lower. In this paper we challenge this presumption of effectiveness and show that the introduction of a positive (expected) antitrust fine may drive firms from partial cartels to a monopolistic cartel. Moreover, introducing uncertainty on market demand, we show that the social optimal competition policy can call for a finite or even zero antitrust penalty even if there are no enforcement costs. We first show our results in a Cournot industry with five symmetric firms and equilibrium binding agreements. Then we extend the analysis to the case of n symmetric firms and a generic rule of coalition formation. Finally, we consider the case of asymmetric firms and show that our results still hold for an industry populated by one Stackelberg leader and two followers.

Cooperation Among Local Councils for the Provision of Public Goods

In order to provide local public goods, municipalities can cooperate and exploit economiesof scale and scope. We present an analytical model of the costs and benefits of two such forms of cooperation:Consortia and Unions. We find that the efficiency of these two forms of cooperation depends onthe number of participants, the transaction costs, and most importantly the type of local public good. Inparticular, the elasticity of substitution among the services pertaining to a particular public good plays adecisive role. For services with a high elasticity of substitution the Union performs better than the Consortium,and vice versa. This provides a guidance for the decision on which institution provides whatpublic good.

The Impact of Antitrust Fines on the Formation of Collusive Cartels

Abstract The literature on collusive cartels has mainly focused on the impact of antitrust fines on the sustainability of cartels, in infinitely repeated games. This approach, however, does not allow us to study the effect of antitrust fines on the incentives to form cartels in the first place. In this paper, we adopt a coalitional game approach to modeling collusive agreements, showing that antitrust fines may drive firms from partial cartels to a monopolistic cartel. Moreover, by introducing uncertainty on market demand, we show that the socially optimal competition policy can call for a finite or even zero antitrust penalty, even if there are no enforcement costs. We provide a sufficient condition for these results to apply to any coalitional game of cartel formation with symmetric firms. Then, we discuss the extension to asymmetric firms and dynamic collusion.

The Anticompetitive Effects of the Antitrust Policy

Few scholars have seriously considered the possibility that the very existence of an antitrust law might make markets less competitive. In this chapter, we provide a selective review of this thought-provoking literature. The focus of our analysis is on contributions within the limits of the neo-classical theory of firms and markets, pointing out that antitrust legislation can hinder price/output competition. Following this literature, the introduction of antitrust penalties or leniency programmes can have the perverse effect of stabilizing cartels and increasing their size, as these policies may raise the costs of deviating and/or renegotiating a collusive agreement.

Problemi di cooperazione fra agenzie di regolamentazione: il caso del settore idrico

Problemi di cooperazione fra agenzie di regolamentazione: il caso del settore idrico) - ABSTRACT: The regulation of natural monopolies has been widely investigated in economic literature. Particular emphasis has been placed on the relationship between the regulated firm and the regulator. The present work tries to deal with problems that may arise when there is more than one regulator. In this case, if regulators have different objective functions, inefficiency is likely to arise. The water industry seems to suffer from these kind of problems, indeed, given the local dimension of the industry, there are different levels of regulation with possible divergent interests. The analysis is mainly based on the work of David Baron (1985), who investigated the case of a polluting firm in the electricity industry, regulated by two authorities. In my work, I use a similar model to show how non cooperation amongst agencies regulating a firm in the water industry can lead to inefficient equilibria.