Common ownership and entry with dominant firms and a competitive fringe

Keita Kamei ()
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Keita Kamei: Department of Economics, Seinan Gakuin University

Economics Bulletin, 2026, vol. 46, issue 1, 285 - 292

Abstract: This note studies common ownership in an industry with a finite set of dominant quantity-setting firms and an endogenous competitive fringe with free entry under monopolistic competition. Common ownership among dominant firms is summarized by a reduced-form profit-internalization parameter that captures the extent to which managers internalize rivals' profits. Stronger internalization softens competition, lowers dominant-firm output, and induces additional entry of fringe varieties. Embedding this mechanism in a general equilibrium economy with separate workers and owners, where only owners receive firm profits, delivers a simple welfare benchmark. Under free entry, constant-elasticity-of-substitution demand, and Cobb-Douglas expenditure shares, stronger internalization raises the differentiated-goods price index and reduces owners' nominal income, implying that both groups' indirect utilities fall. Consequently, policies that reduce within-industry profit internalization are Pareto improving in this benchmark.

Keywords: common ownership; competitive fringe; free entry; general equilibrium; Cournot competition; monopolistic competition; market structure (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2026-03-30
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