Vertical cross-shareholding: Theory and experimental evidence
AbstractThis paper analyses vertical cross-shareholding, that is, the mutual holding of a minority of shares between vertically related firms. We investigate the conditions under which cross-shareholding improves efficiency. First, we explore the issue in a game-theoretic model and find that cross-shareholding is sufficient to obtain the first-best solution. We then proceed by testing these predictions experimentally. Our findings are that the theory predicts the sellers' decisions accurately and to some extent the price of the buyers. Cross-shareholding appears to occur more frequently than predicted and it enhances efficiency even where not predicted.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 25 (2007)
Issue (Month): 1 (February)
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Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- Werner Güth & Nikos Nikiforakis & Hans-Theo Normann, 2005. "Vertical Cross-Shareholding Theory and Experimental Evidence," Papers on Strategic Interaction 2005-11, Max Planck Institute of Economics, Strategic Interaction Group.
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