This study reveals two different rationales for consumer surplus-enhancing collusion. The first model considers two competitive firms in the final product market, each with one essential patent necessary for production. The equilibrium price under collusion is lower than the price under...

Two suppliers of a homogenous good know that, in the second period, they will be able to collude. Gains from collusion are split according to the Nash bargaining solution. In the first period, either of them is able to invest into process innovation. Innovation changes the status quo pay-off,...