Product market cooperation, entry and consumer welfare

•It is believed that product-market cooperation could harm the consumers.•We show that higher product-market cooperation may benefit the consumers.•This happens if the market structure is determined endogenously.

It is usually believed that product-market cooperation among the competing firms is detrimental for the consumers. We show that this view may not be true in an endogenously determined market structure. Product-market cooperation may benefit the consumers by inducing entry of new firms. Our result is important for competition policies.