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German Working Papers in Law and Economics
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Volume 2008

AUTHOR:
Birgit E. Will and Dieter Schmidtchen

TITLE:
Fighting Cartels: Some Economics of Council Regulation (EC) 1/2003

SUGGESTED CITATION:
Birgit E. Will and Dieter Schmidtchen (2008) "Fighting Cartels: Some Economics of Council Regulation (EC) 1/2003", German Working Papers in Law and Economics: Vol. 2008: Article 7.
http://www.bepress.com/gwp/default/vol2008/iss1/art7


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ABSTRACT:

This paper investigates the effectiveness of the new Council Regulation (EC) 1/2003 which replaces the mandatory notification and authorization system by a legal exception system. Effectiveness is operationalized via the two subcriteria compliance to Art. 81 EC Treaty and the probabilities of type I and type II errors committed by the European Commission. We identify four different types of Perfect Bayesian Nash Equilibria: full-compliance, zero-compliance, positive-compliance and full-deterrence. We show that the Commission can, in principle, hit the full-compliance equilibrium, where the cartelizing firms fully obey the requirements of Art 81(3) EC Treaty and both error probabilities are zero.




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