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Government-leading welfare-improving collusion

Junichi Haraguchi and Toshihiro Matsumura ()

International Review of Economics & Finance, 2018, vol. 56, issue C, 363-370

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.

Keywords: Repeated game; Cournot–Bertrand welfare comparison (search for similar items in EconPapers)
JEL-codes: L41 L13 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:56:y:2018:i:c:p:363-370

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