Law Commons^™

Asymmetric Stakes In Antitrust Litigation, Erik Hovenkamp, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

Private antitrust litigation often involves a dominant firm being accused of exclusionary conduct by a smaller rival or entrant. Importantly, the firms in such cases generally have asymmetric stakes: the defendant typically has a much larger financial interest on the line. We explore the broad policy implications of this fact using a novel model of litigation with endogenous effort. Asymmetric stakes lead dominant defendants to invest systematically more resources into litigation, causing the plaintiff's success probability to fall below the efficient level--a distortion that carries over to ex ante settlements. We explain that enhanced damages may reduce the problem, but …