Advantageous symmetric cross-ownership and mergers

Konstantinos Papadopoulos

Economics Letters, 2022, vol. 220, issue C

Abstract: We model an industry where a subset of firms is interlinked via a reciprocal and symmetric share exchange agreement. Under quantity competition, a merger aiming at acquisition of market power can be reproduced by the same firms under a symmetric cross-ownership scheme. Under linear demand, a non-controlling symmetric cross-ownership scheme is always advantageous to its members if at least (2−2)(1+n) firms in an n-firm industry participate. The threshold drops to (1+n)/2 for relatively low levels of cross-ownership. Cross-ownership schemes require fewer participants than mergers to be advantageous and can be more profitable than equal size mergers. Unlike mergers, a unique stable scheme exists.

Keywords: Common ownership; Cross-ownership; Minority stakes; Cartel; Merger (search for similar items in EconPapers)
JEL-codes: D43 G34 L11 L13 L41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:220:y:2022:i:c:s0165176522003500

DOI: 10.1016/j.econlet.2022.110876

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