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Can Partial Horizontal Ownership Lessen Competition More Than a Monopoly?

Author

Listed:
  • Duarte Brito

    (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia | Center for Advanced Studies in Management and Economics)

  • Ricardo Ribeiro

    (Universidade Católica Portuguesa, Católica Porto Business School)

  • Helder Vasconcelos

    (Universidade do Porto, Faculdade de Economia and Center for Economics and Finance)

Abstract

In this paper we investigate the anti-competitive effects of partial horizontal ownership in a setting where: (i) two cost-asymmetric firms compete à la Cournot; (ii) managers deal with eventual conflicting interests of the different shareholders by maximizing a weighted sum of firms operating profits; and (iii) weights result from the corporate control structure of the firm they run. Within this theoretical structure, we find that if the manager of the more efficient firm weights the operating profit of the (inefficient) rival more than its own profit, then partial ownership can lessen competition more than a monopoly.

Suggested Citation

  • Duarte Brito & Ricardo Ribeiro & Helder Vasconcelos, 2018. "Can Partial Horizontal Ownership Lessen Competition More Than a Monopoly?," Working Papers de Economia (Economics Working Papers) 02, Católica Porto Business School, Universidade Católica Portuguesa.
    • Handle: RePEc:cap:wpaper:022018
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    References listed on IDEAS

    as
    1. José Azar & Martin C. Schmalz & Isabel Tecu, 2018. "Anticompetitive Effects of Common Ownership," Journal of Finance, American Finance Association, vol. 73(4), pages 1513-1565, August.
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    8. Jacob P. Gramlich & Serafin J. Grundl, 2017. "Estimating the Competitive Effects of Common Ownership," Finance and Economics Discussion Series 2017-029, Board of Governors of the Federal Reserve System (U.S.).
    9. Brito, Duarte & Osório, António & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Unilateral effects screens for partial horizontal acquisitions: The generalized HHI and GUPPI," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 127-189.
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    11. Duarte Brito & Einer Elhauge & Ricardo Ribeiro & Helder Vasconcelos, 2018. "Modeling Horizontal Shareholding with Ownership Dispersion," Working Papers de Economia (Economics Working Papers) 01, Católica Porto Business School, Universidade Católica Portuguesa.
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    Cited by:

    1. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2020. "Overlapping ownership, endogenous quality, and welfare," Economics Letters, Elsevier, vol. 190(C).
    2. Romain Lestage, 2021. "Input price discrimination and non-controlling vertical shareholding," Journal of Regulatory Economics, Springer, vol. 59(3), pages 226-250, June.
    3. Arijit Mukherjee, 2023. "Losses from cross-holdings in a duopoly with convex cost and strategic input price determination," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(1), pages 81-91, April.
    4. Leonardos, Stefanos & Petrakis, Emmanuel & Skartados, Panagiotis & Stamatopoulos, Giorgos, 2021. "Partial passive ownership holdings and licensing," Economics Letters, Elsevier, vol. 204(C).
    5. Jianxia Yang & Chenhang Zeng, 2021. "Collusive stability of cross-holding with cost asymmetry," Theory and Decision, Springer, vol. 91(4), pages 549-566, November.
    6. Kęstutis Peleckis, 2022. "Application of the Fuzzy VIKOR Method to Assess Concentration and Its Effects on Competition in the Energy Sector," Energies, MDPI, vol. 15(4), pages 1-16, February.
    7. Brito, Duarte & Elhauge, Einer & Ribeiro, Ricardo & Vasconcelos, Helder, 2023. "Modelling the objective function of managers in the presence of overlapping shareholding," International Journal of Industrial Organization, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Partial Horizontal Ownership; Common-Ownership; Cross-Ownership; Full Joint Ownership; Duopoly; Cost Asymmetry;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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