Modelling the diffusion of the deterrent effects of competition policy

Through its competition policy interventions the European Commission not only addresses infringements of EU competition law by the firms directly involved, but it also deters possible future anticompetitive behaviour by these firms and other market players.

The present paper represents the diffusion amongst market players of such deterrent effects by a mixed-influence diffusion model, which includes both an external triggering factor and an internal propagation mechanism. Within the present context, interventions by the European Commission serve as the trigger and interactions between market players, in particular via legal counsels and law firms, stimulate the propagation of the interventions’ deterrent effects. The parameters of the mixed-influence diffusion model are calibrated using survey-based information on average deterrence multipliers and an assessment of the reputation of the European Commission as an enforcer of EU competition rules. On this basis, estimates of the deterrent effect of each individual intervention by the European Commission can be obtained.

Authors

Dierx, A., Ilzkovitz, F., Pataracchia, B., Pericoli, F.