Compensatory Public Good Provision by a Private Cartel

42 Pages Posted: 2 Feb 2016 Last revised: 9 Mar 2020

See all articles by Maarten Pieter Schinkel

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Lukáš Tóth

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE)

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Date Written: December 16, 2019

Abstract

To stimulate companies to take corporate social responsibility collectively, for example for climate change or fair trade, their agreements may be exempted from cartel law. To qualify under Article 101(3) TFEU, the public benefits must compensate consumers for higher prices of the private good. We study the balancing involved in assessing a public interest-cartel in a public goods model that allows for antitrust damage avoidance and crowding out of individual contributions. The required compensatory public good level decreases in each consumer's willingness to pay, which is contrary to the Samuelson condition. A cartel will provide minimal public benefits for maximal private overcharges. Still it is typically not sustainable, since those consumers who are damaged most by the cartel price increase, by self-selection also have the lowest appreciation for the public good and therefore are the hardest to compensate. The information necessary to tell the rare genuine public interest-defense from cartel greenwashing allows the government itself to provide first-best.

Keywords: cartel, public good, corporate social responsibility, sustainability, greenwashing

JEL Classification: H41, K21, L40

Suggested Citation

Schinkel, Maarten Pieter and Tóth, Lukáš, Compensatory Public Good Provision by a Private Cartel (December 16, 2019). Amsterdam Law School Research Paper No. 2016-05, Available at SSRN: https://ssrn.com/abstract=2723780 or http://dx.doi.org/10.2139/ssrn.2723780

Maarten Pieter Schinkel (Contact Author)

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Lukáš Tóth

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

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