MEASURING THE TRUE HARM FROM PRICE-FIXING TO BOTH DIRECT AND INDIRECT PURCHASERS

Authors


  • *The authors wish to acknowledge helpful discussions and/or communications with James Brander, Tim Brennan, John Connor, Martin Hellwig, Jan Tuinstra, Philip Williams, Ralph Winter and The Editor, as well as very constructive comments from two anonymous referees; the very capable research assistance of Jennifer Ng; and the financial support for this research from the Social Sciences and Humanities Research Council of Canada, the Phelps Centre for the Study of Government and Business in the Sauder School of Business and Instituto Sistemas Complejos de Ingeniería, Grants P-05-004-F y FB0816.

Abstract

Legal actions by direct and indirect purchasers to recover damages from price-fixing, common in the United States for years, are now appearing in a number of other countries. Traditional measures of damages are flawed as measures of the true harm suffered and will often significantly understate that true harm. This paper provides measures of the degree of understatement of the true harm when traditional approaches are used and shows how the size of the error depends on the degree of competitiveness of downstream markets. The paper also provides measures of distribution of the true harm between direct and indirect purchasers.

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