Corrupt Public Firms Undermine Social Welfare, Benefit Private Firms
In this research, a study was done on how a public company acting corruptly impacts competition between private and public businesses. When firms compete in a market with some corruption, the private company earns more profit when they compete by lowering prices (Bertrand competition). However, social welfare does not always benefit the most from this competition style if the corruption is too high. Interestingly, a certain level of corruption can actually be good for overall social welfare when competing by adjusting quantities (Cournot competition). This study shows that some corruption can lead to complicated outcomes in the mixed business world.