As governments continue to privatize infrastructure services like electricity or gas the importance of private infrastructure providers increases. After some years these providers are often confronted with stricter state regulation that impacts their freedom of action and reduces their...

We study collusion between a public firm and a private firm, characterizing the outcome (market shares, profits, and consumer surplus) that results from Nash bargaining between the two firms relative to the non-cooperative outcome. We find that if the public firm’s preference for consumer...