Cartel Damages Claims, Passing-On, and Passing-Back

Abstract

Firms can mitigate the harm of an input cartel by passing on some of the higher cost to their customers by raising their own prices. Recent damages claims have highlighted that firms may also respond by reducing the prices that are paid to their suppliers of complementary inputs; the firm thereby passes back some harm upstream. To provide guidance for practitioners as to how such effects together affect the division of the harm, we derive the equilibrium ‘passing-on’ and ‘passing-back’ effects in a successive oligopolies model where one of two inputs is cartelised. We show that the passing-back effect is larger when there is greater market power in the complementary input sector. This reduces the passing-on effect. The complementary input suppliers can incur substantial harm, and the harm that is inflicted on the cartel’s direct and/or indirect purchasers can thereby be reduced.

Publication DOI: https://doi.org/10.1007/s11151-024-09991-9
Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
College of Business and Social Sciences > Aston Business School > Centre for Personal Financial Wellbeing
College of Business and Social Sciences > Aston Business School
Aston University (General)
Additional Information: Copyright © The Author(s) 2024. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/.
Uncontrolled Keywords: Cartel overcharge,Cost pass-through,Damages,Vertically related markets,Economics and Econometrics,Strategy and Management,Organizational Behavior and Human Resource Management,Management of Technology and Innovation
Publication ISSN: 1573-7160
Last Modified: 25 Nov 2024 08:56
Date Deposited: 31 Oct 2024 10:23
Full Text Link:
Related URLs: https://www.sco ... tnerID=8YFLogxK (Scopus URL)
https://link.sp ... 151-024-09991-9 (Publisher URL)
PURE Output Type: Article
Published Date: 2024-09-12
Published Online Date: 2024-09-12
Accepted Date: 2024-09-01
Authors: Garrod, Luke
Han, Tien Der
Harvey, James
Olczak, Matthew (ORCID Profile 0000-0001-6808-3832)

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