Unprofitable Common Ownership with Asymmetric Distribution Channels

Aika Monden () and Tomomichi Mizuno
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Aika Monden: Graduate School of Management, Kyoto University

No 2317, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: Common ownership has been observed in many industries and is believed to have a moderating effect on competition and tends to increase the proï¬ ts of ï¬ rms in which shares are held. This study challenges this common ownership characteristic. We consider a market with one upstream and two downstream ï¬ rms. One downstream ï¬ rm sells its products in two independent markets, while the other sells its products in only one of the two markets. The relationship between common ownership and input prices changes in the presence of channel asymmetry. In other words, an increase in the degree of common ownership can lead to an increase in input prices. Thus, common ownership may reduce downstream ï¬ rms’ proï¬ ts, consumer surplus, and total surplus. We also investigate whether this result is robust to several extensions.

Pages: 27 pages
Date: 2023-10
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