Monday, August 2, 2021

On Distributive Justice by Antitrust: The Robin Hood Cartel

On Distributive Justice by Antitrust: The Robin Hood Cartel


Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute


Inequality concerns in antitrust could justify market power in return for a fairer allocation by weighing the consumer welfare of disadvantaged groups more heavily. A simple example illustrates the trade-offs involved in exempting redistribution agreements from cartel law. Permitting competitors to jointly set prices gives them the ability to price discriminate: overcharging the rich and giving lower than competitive prices to the poor. Provided society values redistribution enough, such a `Robin Hood cartel' is profitable, despite losing money on the poor and creating deadweight-losses. Yet the poor will be given only what is minimally required for permission to take profit-maximizing from the rich. A full-payout plan does not necessarily reduce total deadweight-losses. In essence, assigning a larger relative consumer welfare weight to the poor discounts inefficiencies on the rich.

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