On Distributive Justice by Antitrust: The Robin Hood Cartel
Forthcoming in Journal of Competition Law & Economics
Amsterdam Law School Research Paper No. 2021-16
Amsterdam Center for Law & Economics Working Paper No. 2021-06
31 Pages Posted: 22 Jun 2021 Last revised: 17 Dec 2021
Date Written: June 18, 2021
Abstract
Equity concerns in antitrust could justify market power in return for a fairer allocation by weighing the consumer welfare of certain disadvantaged groups more heavily. A simple example of an equity-justified agreement illustrates how seeking distributive justice through relaxed antitrust enforcement is ineffective and inefficient. Permitting competitors to jointly set prices gives them the power to price discriminate, which they could use to redistribute wealth by 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 in return for permission to take from the rich. Without conditions, the joint-profit maximizing wealth redistribution is nothing more than alms for the poor. They receive more under a full-payout plan, but total deadweight losses remain high. In essence, assigning a larger relative consumer welfare weight to the poor discounts the inefficiencies on the rich.
Keywords: inequality, fairness, antitrust, cartel, price discrimination, taxation
JEL Classification: D63, K21, L41
Suggested Citation: Suggested Citation