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Product Market Cooperation, Foreign Direct Investment and Consumer Welfare

Author

Listed:
  • Arijit Mukherjee

    (Nottingham University Business School
    CESifo
    INFER
    City University of Hong Kong)

  • Uday Bhanu Sinha

    (University of Delhi)

Abstract

Cooperation among rival firms raises serious skepticism among economists, policymakers, and legal experts, since it generally hurts consumers. We show that this may not be the case in an open economy with strategic foreign direct investment (FDI). Under Cournot competition, increased cooperation among firms reduces the domestic welfare, but it may benefit the consumers by attracting FDI. Under Bertrand competition with differentiated goods, increased cooperation may increase consumer surplus, and it may increase or decrease the domestic welfare by attracting FDI.

Suggested Citation

  • Arijit Mukherjee & Uday Bhanu Sinha, 2024. "Product Market Cooperation, Foreign Direct Investment and Consumer Welfare," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 315-326, March.
    • Handle: RePEc:kap:revind:v:64:y:2024:i:2:d:10.1007_s11151-023-09925-x
    DOI: 10.1007/s11151-023-09925-x
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    More about this item

    Keywords

    Cooperation; Consumer surplus; Welfare; Foreign direct investment;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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