mialon_05

Emory University
Department of Economics
Working Papers

Title:

Private v. Public Antitrust Enforcement: A Strategic Analysis

Number: 05-23

Author:
R. Preston McAfee, Hugo Mialon and Sue Mialon

Issue Date: August 2005

Abstract: We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust crime and lawsuit. The model highlights the tradeoff that private firms are ex ante more likely than the government to be informed about actual antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. With coupled damages (according to which the plaintiff receives what the defendant pays), if the court is sufficiently accurate, adding private to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Moreover, pure private enforcement is never strictly optimal. However, in general, achieving the welfare-maximizing outcome requires private enforcement with damages that are both multiplied and decoupled.

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Title:	Private v. Public Antitrust Enforcement: A Strategic Analysis
Number:	05-23
Author:	R. Preston McAfee, Hugo Mialon and Sue Mialon
Issue Date:	August 2005
Abstract:	We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust crime and lawsuit. The model highlights the tradeoff that private firms are ex ante more likely than the government to be informed about actual antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. With coupled damages (according to which the plaintiff receives what the defendant pays), if the court is sufficiently accurate, adding private to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Moreover, pure private enforcement is never strictly optimal. However, in general, achieving the welfare-maximizing outcome requires private enforcement with damages that are both multiplied and decoupled.