Public–private collusion

Filipa Mota; João Correia-da-Silva; Joana Pinho

doi:10.1007/s11151-023-09903-3

Public–private collusion

Filipa Mota, João Correia-da-Silva, Joana Pinho^*

^*Autor correspondente para este trabalho

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1 Citação (Scopus)

20 Transferências (Pure)

Resumo

We study collusion between a public firm and a private firm facing linear demand and quadratic costs. We characterize the collusive outcome that results from Nash bargaining and compare it to the non-cooperative outcome. If the public firm’s taste for consumer surplus is mild, both firms reduce output (as in a private duopoly). If it is intermediate, while the public firm reduces output, the private firm expands output to such an extent that total output increases. If it is strong, the private firm’s output expansion does not compensate for the public firm’s output contraction, and thus total output decreases. We also characterize collusion sustainability, and assess the impact of relative bargaining power, degree of cost convexity, public firm’s taste for total surplus, and cost asymmetry. We conclude that, by reducing the productive inefficiency that is caused by the public firm being more expansionary, collusion may lead to higher profits and consumer surplus.

Idioma original	English
Páginas (de-até)	393–417
Número de páginas	25
Revista	Review of Industrial Organization
Volume	62
Número de emissão	4
DOIs	https://doi.org/10.1007/s11151-023-09903-3
Estado da publicação	Publicado - jun. 2023

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10.1007/s11151-023-09903-3Licença:

72639176Final published version, 2,48 MBLicença:

http://hdl.handle.net/10400.14/41495Licença:

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CEGE: Research Center in Management and Economics
Silva, M. (Professor Catedrático), Sousa, R. (Professor Catedrático), Alves, P. (Professor Auxiliar), Madsen, A. (Professor Auxiliar Convidado), Lourenço, A. (Professor Associado), Carvalho, A. S. (Professor Associado), Andrade, A. (Professor Auxiliar), Silva, P. D. (Professor Associado), Vlačić, B. (Professor Auxiliar Convidado), Martins, C. (Professor Auxiliar Convidado), Gomes, C. (Investigador Auxiliar), Gevrek, Z. E. (Professor Auxiliar Convidado), Oliveira, F. G. D. (Professor Associado), Faria, G. (Professor Associado Convidado), Marreiros, H. (Bolseiro), Pinho, J. (Professor Auxiliar Convidado), Machado, J. (Professor Associado), Araújo, J. (Investigador Auxiliar), Pinto, J. (Professor Auxiliar), Rego, A. (Professor Catedrático), Gaspar, J. M. (Investigador Auxiliar), Corbo, L. (Professor Auxiliar Convidado), Costa, L. (Professor Associado), Fernandes, L. (Professor Auxiliar), Sottomayor, M. (Professor Auxiliar), Martins, N. (Professor Catedrático), Hernández-Marrero, P. (Investigador Auxiliar), Gonçalves, R. (Professor Associado), Ribeiro, R. (PI), Coelho, S. L. (Docente Assistente), Pereira, S. M. (Investigador Auxiliar), Silva, S. (Professor Associado), Rodrigues, V. (Professor Associado), Sotiros, D. G. (Investigador Auxiliar), Valverde, C. (Professor Auxiliar), Leitão, A. (Professor Auxiliar), Julião, J. (Professor Auxiliar), Tavares, M. (Professor Auxiliar), Lages, C. R. (Investigador Auxiliar), Elmashhara, M. G. (Investigador Auxiliar) & Teymourifar, A. (Investigador Auxiliar)
1/01/20 → 31/12/24
Projeto

Citação

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title = "Public–private collusion",

abstract = "We study collusion between a public firm and a private firm facing linear demand and quadratic costs. We characterize the collusive outcome that results from Nash bargaining and compare it to the non-cooperative outcome. If the public firm{\textquoteright}s taste for consumer surplus is mild, both firms reduce output (as in a private duopoly). If it is intermediate, while the public firm reduces output, the private firm expands output to such an extent that total output increases. If it is strong, the private firm{\textquoteright}s output expansion does not compensate for the public firm{\textquoteright}s output contraction, and thus total output decreases. We also characterize collusion sustainability, and assess the impact of relative bargaining power, degree of cost convexity, public firm{\textquoteright}s taste for total surplus, and cost asymmetry. We conclude that, by reducing the productive inefficiency that is caused by the public firm being more expansionary, collusion may lead to higher profits and consumer surplus.",

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author = "Filipa Mota and Jo{\~a}o Correia-da-Silva and Joana Pinho",

note = "Funding Information: We are grateful to Larry White (Editor) and two anonymous referees for extremely useful comments and suggestions. We also thank Duarte Brito, Joana Resende, Odd Rune Straume, Yassine Lefouili, and the audiences at PEJ 2018 (Lisbon), EARIE 2018 (Athens), EBES 2019 (Coventry), and WIER 2021 (Aveiro). This research was financed by Portuguese public funds through Funda{\c c}{\~a}o para a Ci{\^e}ncia e a Tecnologia (SFRH/BD/100022/2014, UID/GES/00731/2016, PTDC/EGE-ECO/29332/2017, and UIDB/04105/2020) Publisher Copyright: {\textcopyright} 2023, The Author(s).",

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doi = "10.1007/s11151-023-09903-3",

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AU - Correia-da-Silva, João

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N1 - Funding Information: We are grateful to Larry White (Editor) and two anonymous referees for extremely useful comments and suggestions. We also thank Duarte Brito, Joana Resende, Odd Rune Straume, Yassine Lefouili, and the audiences at PEJ 2018 (Lisbon), EARIE 2018 (Athens), EBES 2019 (Coventry), and WIER 2021 (Aveiro). This research was financed by Portuguese public funds through Fundação para a Ciência e a Tecnologia (SFRH/BD/100022/2014, UID/GES/00731/2016, PTDC/EGE-ECO/29332/2017, and UIDB/04105/2020) Publisher Copyright: © 2023, The Author(s).

PY - 2023/6

Y1 - 2023/6

N2 - We study collusion between a public firm and a private firm facing linear demand and quadratic costs. We characterize the collusive outcome that results from Nash bargaining and compare it to the non-cooperative outcome. If the public firm’s taste for consumer surplus is mild, both firms reduce output (as in a private duopoly). If it is intermediate, while the public firm reduces output, the private firm expands output to such an extent that total output increases. If it is strong, the private firm’s output expansion does not compensate for the public firm’s output contraction, and thus total output decreases. We also characterize collusion sustainability, and assess the impact of relative bargaining power, degree of cost convexity, public firm’s taste for total surplus, and cost asymmetry. We conclude that, by reducing the productive inefficiency that is caused by the public firm being more expansionary, collusion may lead to higher profits and consumer surplus.

AB - We study collusion between a public firm and a private firm facing linear demand and quadratic costs. We characterize the collusive outcome that results from Nash bargaining and compare it to the non-cooperative outcome. If the public firm’s taste for consumer surplus is mild, both firms reduce output (as in a private duopoly). If it is intermediate, while the public firm reduces output, the private firm expands output to such an extent that total output increases. If it is strong, the private firm’s output expansion does not compensate for the public firm’s output contraction, and thus total output decreases. We also characterize collusion sustainability, and assess the impact of relative bargaining power, degree of cost convexity, public firm’s taste for total surplus, and cost asymmetry. We conclude that, by reducing the productive inefficiency that is caused by the public firm being more expansionary, collusion may lead to higher profits and consumer surplus.

KW - Collusion

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KW - Mixed oligopoly

KW - Nash bargaining

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DO - 10.1007/s11151-023-09903-3

M3 - Article

SN - 0889-938X

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SP - 393

EP - 417

JO - Review of Industrial Organization

JF - Review of Industrial Organization

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ER -

Public–private collusion

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