Cross-ownership in network industries: when less competition implies less profits or more social welfare

Domenico Buccella (), Luciano Fanti () and Luca Gori ()
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Domenico Buccella: Kozminski University
Luciano Fanti: University of Pisa

Journal of Economics, 2025, vol. 144, issue 3, No 1, 203-230

Abstract: Abstract Considering a Cournot duopoly with network goods, this paper shows some unconventional effects due to passive unilateral cross-ownership (i.e., one firm holds non-controlling shares in the rival firm): the industry profitability of the network duopoly can be reduced, or social welfare increased, depending on the degree of compatibility between goods (full, partial, no compatibility). These findings challenge the conventional results for which cross-holdings improve total profitability and worsen social welfare. The work eventually pinpoints the empirical and policy implications of cross-ownership on profits and welfare.

Keywords: Network externality; Product compatibility; Cournot duopoly; Cross-ownership (search for similar items in EconPapers)
JEL-codes: D4 L1 L3 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:144:y:2025:i:3:d:10.1007_s00712-024-00888-5

DOI: 10.1007/s00712-024-00888-5

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