Cross-ownership and excess capacity in a differentiated duopoly

Junlong Chen, Zhiruo Zhang and Jiali Liu

Applied Economics Letters, 2022, vol. 29, issue 21, 1980-1990

Abstract: This paper constructs a duopoly model considering cross-ownership, excess capacity and product differentiation, analyzes the impacts of cross-ownership and product differentiation, and reveals whether there is excess capacity and the optimal cross-ownership decision. The results show that cross-ownership, product differentiation, duopoly type, and shareholding mode have impacts on equilibrium outcomes. Excess, insufficient, and equilibrium capacity may all exist. It is the optimal strategy to hold the shares of the competitor to the greatest extent. In a specific oligopoly market and shareholding mode, the government should regulate cross-ownership.

Date: 2022
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DOI: 10.1080/13504851.2021.1967273

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