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Government-Leading Welfare-Improving Collusion

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  • Haraguchi, Junichi
  • Matsumura, Toshihiro

Abstract

We discuss government-leading welfare-improving collusion in a mixed duopoly. We formulate an infinitely repeated game in which a welfare-maximizing firm and a profit-maximizing firm coexist. The government proposes welfare-improving collusion and this is sustainable if both firms have incentives to follow it. We compare two competition structures-Cournot and Bertrand-in this long-run context. We find that Cournot competition yields greater welfare when the discount factor is sufficiently large, whereas Bertrand competition is better when the discount factor is small.

Suggested Citation

  • Haraguchi, Junichi & Matsumura, Toshihiro, 2017. "Government-Leading Welfare-Improving Collusion," MPRA Paper 77525, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77525
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    Cited by:

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    2. Filipa Mota & João Correia-da-Silva & Joana Pinho, 2023. "Public–Private Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(4), pages 393-417, June.
    3. Kosuke Hirose & Toshihiro Matsumura, 2019. "Comparing welfare and profit in quantity and price competition within Stackelberg mixed duopolies," Journal of Economics, Springer, vol. 126(1), pages 75-93, January.
    4. Bárcena-Ruiz, Juan Carlos & Garzón, María Begoña, 2020. "Mergers between local public firms," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    5. Marc Escrihuela-Villar & Jorge Guillén, 2020. "Innovation and Competition in a Mixed Oligopoly," Hacienda Pública Española / Review of Public Economics, IEF, vol. 234(3), pages 59-74, September.

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    More about this item

    Keywords

    repeated game; public collusion; Cournot-Bertrand welfare comparison;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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