Working Paper: CEPR ID: DP16991
Authors: Maarten Pieter Schinkel; Yossi Spiegel; Leonard Treuren
Abstract: Schinkel and Spiegel (2017) finds that allowing sustainability agreements in which firms coordinate their investments in sustainability leads to lower investments and lower output. By contrast, allowing production agreements, in which firms coordinate output yet continue to compete on investments, boosts investments in sustainability and may also benefit consumers. We extend these results to the case where investments affect not only the consumersÂ’ willingness to pay, but also marginal cost. We show that sustainability agreements continue to lower investments and output levels, while production agreements increase investments but when they benefit consumers, they are not profitable for firms and will therefore not be formed. This implies that exempting horizontal agreements from the cartel prohibition cannot be relied on to advance sustainability goals and satisfy the competition law requirement that consumers must not be worse off.
Keywords: sustainability; investment; horizontal agreement
JEL Codes: K21; L13; L40; Q01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Sustainability Agreements (Q01) | Lower Investments (G31) |
| Lower Investments (G31) | Lower Output (E23) |
| Sustainability Agreements (Q01) | Lower Output (E23) |
| Production Agreements (L14) | Higher Investments (G31) |
| Higher Investments (G31) | Not Profitable for Firms (D21) |
| Production Agreements (L14) | Not Profitable for Firms (D21) |