Cross Holding and Imperfect Product Markets

Matthew J. Clayton and Bjorn N. Jorgensen

New York University, Leonard N. Stern School Finance Department Working Paper Seires from New York University, Leonard N. Stern School of Business-

Abstract: We consider a setting in which two firms first choose equity positions in each others stock (cross holdings) and then compete in an imperfect product market. We demonstrate that cross holdings lead to higher firm profits and higher consumer surplus when the competitors’ products are complements. We find that cross holdings lead to lower firm profits and higher consumer surplus when the products are substitutes. This finding is in contrast to the existing literature which establishes that cross holdings leads

Date: 1999-09
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Working Paper: Cross Holding and Imperfect Product Markets (1998)
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Persistent link: http://EconPapers.repec.org/RePEc:fth:nystfi:99-058

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