Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust Lawsuits / Severin Borenstein.

Format:

Book

Author/Creator:

Borenstein, Severin, author.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5085.

NBER working paper series no. w5085

Language:

English

Physical Description:

1 online resource: illustrations (black and white).

Other Title:

Discount Contracts as Compensation and Punishment in Antitrust Lawsuits

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

A number of recent antitrust lawsuits have been settled with discount contracts in which the defendants agree in the future to sell to the plaintiffs at a discount off of the price they offer to other buyers. Economists often object to such settlements, arguing that the sellers will partially or fully offset these discounts by increasing the baseline price from which the discount is calculated. This paper shows that poorly structured discount contracts will indeed result in price increases for other buyers and that other buyers, not the sellers, are likely to bear most of the cost imposed by the settlement. Carefully formulated discount settlements, however, can avoid giving the sellers an incentive to raise prices to buyers not covered by the settlement. In such cases, the defendant bears the full cost of the settlement. I suggest that poorly structured settlements still take place because their costs are borne primarily by consumers who are not parties to these cases.

Notes:

Print version record

April 1995.