On Distributive Justice by Antitrust : The Robin Hood Cartel

Inequality concerns in antitrust could justify market power in return for a fairer allocation by weighing the consumer welfare of disadvantaged groups more heavily. A simple example illustrates how seeking distributive justice through lenient antitrust enforcement is effective nor efficient. Permitting competitors to jointly set prices gives them the ability to price discriminate: overcharging the rich and giving lower than competitive prices to the poor. Provided society values redistribution enough, such a `Robin Hood cartel' is profitable, despite losing money on the poor and creating deadweight-losses. Yet the poor will be given only what is minimally required for permission to take profit-maximizing from the rich. A full-payout plan does not necessarily reduce total deadweight-losses. In essence, assigning a larger relative consumer welfare weight to the poor discounts the inefficiencies on the rich