Downstream cross-holdings and upstream advertising

Qing Hu () and Tomomichi Mizuno
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Qing Hu: Kushiro Public University of Economics

No 2506, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: We investigate a supply chain comprising a upstream firm engaged in advertising and two downstream firms who compete with differentiated products. We find that the producer surpluses always decrease with the degree of the cross-holdings between the downstream firms, if the upstream firm engages in informative advertising. This result contradicts the conventional wisdom that cross-holdings benefit the participants because firms become less competitive with the degree of cross-holdings. In addition, we also find that our main results are robust under upstream persuasive advertising.

Pages: 12 pages
Date: 2025-02
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