Public–Private Collusion

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