3. Conclusion
Cooperation among the final goods producers is generally believed to make the consumers worse off. We show that this view may not be true if the number of firms is determined endogenously. Product-market cooperation tends to reduce the total output for a given number of firms, while it tends to increase the total output by attracting more firms in the market. If the increased product-market cooperation is not very high, relatively higher product-market cooperation increases the total output and makes the consumers better off. Our result is important for competition policies and shows that the consideration of firms as a continuous variable, as assumed in Brander and Spencer (1985), is not innocent.
