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Why do people violate the law? The Hobbesian outlook would be that people
violate the law in the absence of appropriate punishment. John Stuart Mill would
have attributed the violation to the lack of incentives to behave legally. In this
paper, we combine these two factors to examine the effect of antitrust regulation
on price competition. We examine the case of public drug procurement in
St. Petersburg, Russia between 2008 and 2010. Our results highlight that the
Russian Federal Antitrust Service was unable to enforce competitive bidding
when the main regulators interpreted the competition law differently. The
Committee for Public Health in St. Petersburg notably leveraged the loopholes
in antitrust enforcement and successfully maintained illegal relationships with
different economic agents. We use data on Russian drug procurement to
illustrate these effects. Based on our estimates, we suggest policy implications
regarding antitrust policy.
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