Public Goods Provision by a Private Cartel

Tinbergen Institute Discussion Paper 2019-086/VII

41 Pages Posted: 15 Jan 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)

Multiple version iconThere are 2 versions of this paper

Date Written: December 24, 2019

Abstract

To stimulate companies to take corporate social responsibility collectively, for example for fair trade or the environment, their agreements may be exempted from cartel law. To qualify, 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. The required compensating public good level decreases in each consumer's willingness to pay, which is contrary to the Samuelson condition. The cartel will provide minimal public good for maximal overcharges. Nevertheless it is typically not sustainable, since those consumers that are damaged most by the cartel price increase, by self-selection also have the lowest appreciation for the public good. The information necessary to tell the rare genuine public interest-defense from cartel green-washing allows the government to provide first-best itself.

Keywords: cartel, public good, corporate social responsibility, sustainability, green-washing

JEL Classification: H41, K21, L40

Suggested Citation

Schinkel, Maarten Pieter and Tóth, Lukáš, Public Goods Provision by a Private Cartel (December 24, 2019). Tinbergen Institute Discussion Paper 2019-086/VII. Available at SSRN: https://ssrn.com/abstract=3509062 or http://dx.doi.org/10.2139/ssrn.3509062

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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