Product Market Cooperation, Foreign Direct Investment and Consumer Welfare

Arijit Mukherjee and Uday Bhanu Sinha ()
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Uday Bhanu Sinha: University of Delhi

Review of Industrial Organization, 2024, vol. 64, issue 2, No 6, 315-326

Abstract: 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.

Keywords: Cooperation; Consumer surplus; Welfare; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: F21 F23 L13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11151-023-09925-x

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