Green antitrust conundrum: Collusion with social goals

Hatsor, Limor and Hashimzade, Nigar and Jelnov, Artyom (2024): Green antitrust conundrum: Collusion with social goals.

Abstract

Recent antitrust regulations in several countries have granted exemptions for col- lusion aimed at achieving environmental goals. Firms can apply for exemptions if collusion helps to develop or to implement costly clean technology, particularly in sec- tors like renewable energy, where capital costs are high and economies of scale are significant. However, if the cost of the green transition is unknown to the competition regulator, firms might exploit the exemption by fixing prices higher than necessary. The regulator faces the decision of whether to permit collusion and whether to commission an investigation of potential price fixing, which incurs costs. We fully characterise the equilibria in this scenario that depend on the regulator’s belief about the high cost of green transition. If the belief is high enough, collusion will be allowed. We also identify conditions under which a regulator’s commitment to always investigate price fixing is preferable to making discretionary decisions.

• Item Type: MPRA Paper
• Language: English
• Keywords: policy; antitrust; collusion; environment
• Subjects: F - International Economics > F0 - General; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; K - Law and Economics > K2 - Regulation and Business Law > K21 - Antitrust Law; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects

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