Can Collusion Promote Sustainable Consumption and Production?

Posted by Social Science Research Network

Can Collusion Promote Sustainable Consumption and Production?

Maarten Pieter Schinkel (University of Amsterdam) & Yossi Spiegel (Tel Aviv University)

Abstract:     Several competition authorities consider the exemption of horizontal agreements among firms from antitrust liability if the agreements sufficiently promote public interest objectives such as sustainable consumption and production. We show that when consumers value sustainable products and firms choose investments in sustainability before choosing output or prices, coordination of output choices or prices boosts investments in sustainability and may even enhance consumer surplus when products are sufficiently close substitutes and the marginal cost of investment in sustainability is relatively low. By contrast, coordination of investments in sustainability leads to lower investments and harms consumers.