Strategic capacity investment with common ownership

Domenico de Giovanni, Richard Ruble and Dimitrios Zormpas
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Richard Ruble: EM - EMLyon Business School

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Abstract: We study how common ownership affects the magnitude and dynamics of investments in a duopoly. Followers exhibit less aggressive timing and quantity reactions because they internalize their effects on leaders. Leaders are therefore more likely to opt for a deterrence strategy, but their own internalization of followers softens their decisions. If firm roles are exogenous, high common ownership links lead to a relatively efficient staged investment outcome. Conversely, if firm roles are endogenous, high common ownership drives the winner of the preemption race to concede a "follower monopoly." Our numerical analysis finds that common ownership is generally detrimental to consumer surplus and welfare.

Keywords: Investment analysis; Common ownership; Entry deterrence; Strategic capacity investment (search for similar items in EconPapers)
Date: 2025-05-24
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Published in European Journal of Operational Research, 2025, FORTH, 12 p. ⟨10.1016/j.ejor.2025.05.026⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05098376

DOI: 10.1016/j.ejor.2025.05.026

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