Can cross-holdings benefit consumers?

Hao Cheng, Xiaoting Wu and Chenhang Zeng
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Hao Cheng: Shenzhen MSU-BIT University
Xiaoting Wu: Zhongnan University of Economics and Law

Journal of Economics, 2024, vol. 141, issue 3, No 3, 245-273

Abstract: Abstract Common wisdom suggests that cross-holdings can lead to significant output contraction, and thus hurt consumers. On the contrary, we demonstrate that cross-holdings may increase industry output and benefit consumers in an asymmetric Cournot oligopoly with the presence of a welfare-maximizing tax/subsidy policy. The government will strategically use the tax/subsidy policy to regulate the market outcomes in anticipation of the adverse effect of cross-holdings, which could raise industry output and benefit consumers in certain situations depending on the cost distributions and cross-holding structures.

Keywords: Cross-holding; Tax/subsidy policy; Consumer surplus (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:141:y:2024:i:3:d:10.1007_s00712-023-00850-x

DOI: 10.1007/s00712-023-00850-x

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