Cross ownership and divestment incentives

Rune Stenbacka and Geert Van Moer

Economics Letters, 2021, vol. 201, issue C

Abstract: Even though cross ownership raises industry profits, we demonstrate that it is prone to a commitment problem. Specifically, we show that producers in a Cournot duopoly have unilateral incentives to resell their minority share-holdings in the rival to outside investors, leading to an equilibrium with complete divestments. This feature challenges the stability of cross ownership configurations.

Keywords: Cross ownership; Divestment incentives (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:201:y:2021:i:c:s0165176521000252

DOI: 10.1016/j.econlet.2021.109748

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