IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-23-00239.html
   My bibliography  Save this article

Bounds on the damages from a price overcharge

Author

Listed:
  • Sander Heinsalu

    (Compass Lexecon)

Abstract

In antitrust cases where the defendant, whether it's a cartel or a dominant supplier, overcharges a firm, the defendant typically makes three claims: (1) the firm passed on the higher price to its customers, (2) its sales volume did not decrease materially, and (3) the damages are small. To calculate the damages, these cases usually estimate the price pass-on and sometimes consider the volume decrease. This study establishes direct bounds on the damages using minimal data: the sales figures with and without the overcharge, along with the exact amount of the overcharge. These bounds reduce the risk of over- or under-compensation and offer a sense-check on any alternative estimates of the damages.

Suggested Citation

  • Sander Heinsalu, 2023. "Bounds on the damages from a price overcharge," Economics Bulletin, AccessEcon, vol. 43(3), pages 1265-1270.
    • Handle: RePEc:ebl:ecbull:eb-23-00239
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2023/Volume43/EB-23-V43-I3-P107.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Seade, J., 1985. "Profitable Cost Increases and the Shifting of Taxation: Equilibrium Responses of Markets in Oligopoly," Economic Research Papers 269225, University of Warwick - Department of Economics.
    2. FRANK VERBOVEN & THEON van DIJK, 2009. "Cartel Damages Claims And The Passing‐On Defense," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 457-491, September.
    3. Norman J. Ireland, 1984. "Dual Equilibria and Discontinuous Response in Monopolistic Competition with Two Classes of Consumers," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 377-384, Autumn.
    4. Seade, J, 1985. "Profitable Cost Increases and the Shifting of Taxation : Equilibrium Response of Markets in Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 260, University of Warwick, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boone, Jan & Müller, Wieland, 2012. "The distribution of harm in price-fixing cases," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 265-276.
    2. Garrod, Luke & Li, Ruochen & Russo, Antonio & Wilson, Chris M, 2024. "Understanding Cost Pass-Through when Prices are Dispersed," MPRA Paper 123285, University Library of Munich, Germany.
    3. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    4. Bowei Guo & Giorgio Castagneto Gissey, 2019. "Cost Pass-through in the British Wholesale Electricity Market: Implications of Brexit and the ETS reform," Working Papers EPRG1937, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. Shohei Yoshida, 2018. "Bargaining power and firm profits in asymmetric duopoly: an inverted-U relationship," Journal of Economics, Springer, vol. 124(2), pages 139-158, June.
    6. Martin Besfamille & Philippe De Donder & Jean Marie Lozachmeur, 2009. "Tax enforcement may decrease government revenue," Economics Bulletin, AccessEcon, vol. 29(4), pages 2665-2672.
    7. Stefan Szymanski, 2021. "On the Incidence of an Ad Valorem Tax: The Adoption of VAT in the UK and Cost Pass Through by English Football Clubs," De Economist, Springer, vol. 169(1), pages 37-61, February.
    8. Rachel Griffith & Lars Nesheim & Martin O'Connell, 2018. "Income effects and the welfare consequences of tax in differentiated product oligopoly," Quantitative Economics, Econometric Society, vol. 9(1), pages 305-341, March.
    9. Stamatopoulos, Giorgos, 2019. "A strategic tax mechanism," MPRA Paper 93602, University Library of Munich, Germany.
    10. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872, Elsevier.
    11. Schmidt, Klaus, 2006. "Licensing Complementary Patents and Vertical Integration," CEPR Discussion Papers 5987, C.E.P.R. Discussion Papers.
    12. Karp, Larry S & Perloff, Jeffrey M, 1989. "Estimating Market Structure and Tax Incidence: The Japanese Television Market," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 225-239, March.
    13. Kim, Hyunchul & Lee, Dongwon, 2023. "Tax incidence for menthol cigarettes by race: Evidence from Nielsen Homescan data," Journal of Health Economics, Elsevier, vol. 92(C).
    14. Théophile T Azomahou & Racky Baldé & Abdoulaye Diagne & Pape Yona Mané & Ibrahima Sory Kaba, 2019. "Public finances and tobacco taxation with product variety: Theory and application to Senegal and Nigeria," PLOS ONE, Public Library of Science, vol. 14(2), pages 1-21, February.
    15. Kai A. Konrad & Florian Morath & Wieland Müller, 2014. "Taxation and Market Power," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(1), pages 173-202, February.
    16. Panayiota Lyssiotou & Elena Savva, 2021. "Who pays taxes on basic foodstuffs? Evidence from broadening the VAT base," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(1), pages 212-247, February.
    17. Mattoo, Aaditya, 1999. "Can no antitrust policy be better than some antitrust policy?," Policy Research Working Paper Series 2191, The World Bank.
    18. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 157-178, June.
    19. Menezes, Flavio M. & Quiggin, John, 2022. "Market power amplifies the price effects of demand shocks," Economics Letters, Elsevier, vol. 221(C).
    20. McQuade, Timothy & Salant, Stephen W. & Winfree, Jason, 2009. "Markets with untraceable goods of unknown quality: a market failure exacerbated by globalization," MPRA Paper 21874, University Library of Munich, Germany.

    More about this item

    Keywords

    pass-on; volume effect; private damages; cartel overcharge; abuse of dominance;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-23-00239. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.