Incentive and welfare implications of cross-holdings in oligopoly

Hongkun Ma (), Cheng-Zhong Qin () and Chenhang Zeng ()
Additional contact information
Hongkun Ma: Sun Yat-sen University
Cheng-Zhong Qin: University of California
Chenhang Zeng: Zhongnan University of Economics and Law

Economic Theory, 2024, vol. 77, issue 4, No 4, 975-997

Abstract: Abstract Competitive implications of cross-holdings have been extensively analyzed in the literature. Incentives for engaging cross-holdings and welfare effects were however rarely studied. Although a similar logic as with the merger paradox holds for Cournot oligopolies with homogeneous products and symmetric technologies, we show that there are profit incentives for firms to engage cross-holdings with asymmetric technologies. Furthermore, we show that social welfare could be enhanced with cross-holdings even though the market becomes more concentrated. We also discuss the robustness of both the submodularity of the Cournot model with respect to the presence of cross-holdings and our results with respect to product differentiation.

Keywords: Cross-holding; Joint profits; Oligopoly; Cournot equilibrium; Submodularity (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2024
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00199-021-01398-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:77:y:2024:i:4:d:10.1007_s00199-021-01398-x

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-021-01398-x

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().