‘The effects of asymmetric costs on cartel damages: The importance of the counterfactual’
May 2, 2014 Leave a comment
The CCP seminar returns from its Easter break on Friday 2nd May and we are delighted to welcome Peter Møllgaard (Copenhagen Business School) to the Centre. Peter will be presenting his article entitled ‘The effects of asymmetric costs on cartel damages: The importance of the counterfactual‘ which he has written with his colleague at Copenhagen, Petter Berg. An earlier draft of the article can be found at this link, and an abstract for the paper can be found below.
Cartel overcharges and the resultant damages and welfare losses are typically calculated by subtracting counterfactual prices from cartel prices. We determine both prices in a repeated game with cost asymmetries and product differentiation. Whereas cost asymmetries and product differentiation signifcantly affect counterfactual prices, they only have small effects on collusive prices. We find that over-charges and losses in consumer welfare increase with the degree of cost symmetry and substitutability of products. The case of symmetric costs and homogeneous products makes for the extreme case in which welfare losses are maximal and restitution of damages undercompensates consumers the most.
The seminar will take place from 13:00-14:00 in the Elizabeth Fry Building, Room 1.01.