Product Market Cooperation, Foreign Direct Investment and Consumer Welfare

Mukherjee, Arijit; Sinha, Uday Bhanu

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.

Citation

Mukherjee, A., & Sinha, U. B. (2024). Product Market Cooperation, Foreign Direct Investment and Consumer Welfare. Review of Industrial Organization, 64, 315-326. https://doi.org/10.1007/s11151-023-09925-x

• Journal Article Type: Article
• Acceptance Date: Sep 15, 2023
• Online Publication Date: Nov 1, 2023
• Publication Date: 2024-03
• Deposit Date: Sep 19, 2023
• Publicly Available Date: Nov 2, 2024
• Journal: Review of Industrial Organization
• Print ISSN: 0889-938X
• Electronic ISSN: 1573-7160
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 64
• Pages: 315-326
• DOI: https://doi.org/10.1007/s11151-023-09925-x
• Keywords: Cooperation; Consumer surplus; Welfare; Foreign direct investment JEL Classifications: F21; F23; L13
• Public URL: https://nottingham-repository.worktribe.com/output/25363862