Profit formulation and equilibrium strategy of firms with cross-shareholding
Xinhua Wang and
Finance Research Letters, 2021, vol. 38, issue C
A profit formulation of cross-shareholding among firms was presented based on feedback control principle. Constructing a two-stage game, we focused on the equilibrium strategy and market performance of two firms in Cournot duopoly with cross-shareholding. The equilibrium strategy, which consists of two firms' equilibrium equities and equilibrium outputs, was solved by backward induction. The results show that the equilibrium strategy under cross-shareholding always increases each firm's profit, so as to realize a win-win situation between two rivals, no matter the products are substitutes or complements. However, in the case of substitute products, cross-shareholding reduces consumer surplus and economic welfare.
Keywords: Cross-shareholding; Profit formulation; Operational decision; Equilibrium strategy; Economic welfare (search for similar items in EconPapers)
JEL-codes: C7 D4 L1 L2 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319301047
Access Statistics for this article
Finance Research Letters is currently edited by R. GenÃ§ay
More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().