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Can partial horizontal ownership lessen competition more than a monopoly?

Duarte Brito, Ricardo Ribeiro and Helder Vasconcelos

Economics Letters, 2019, vol. 176, issue C, 90-95

Abstract: In this paper we investigate the anti-competitive effects of partial horizontal ownership in a setting where: (i) two cost-asymmetric firms compete à la Cournot; (ii) managers deal with eventual conflicting interests of the different shareholders by maximizing a weighted sum of the two firms’ operating profits; and (iii) weights result from the corporate control structure of the firm they run. Within this theoretical structure, we find that if the manager of the more efficient firm weights the operating profit of the (inefficient) rival more than its own profit, then partial ownership will lessen competition more than a monopoly when both firms produce.

Keywords: Partial horizontal ownership; Common-ownership; Cross-ownership; Monopoly; Duopoly; Cost asymmetries (search for similar items in EconPapers)
JEL-codes: L11 L12 L13 L41 L50 (search for similar items in EconPapers)
Date: 2019
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