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Ownership and Control in a Competitive Industry

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Author Info

  • Karle, H.
  • Klein, T.J.
  • Stahl, K.O.

    (Tilburg University, Tilburg Law and Economics Center)

Abstract

We study a differentiated product market in which an investor initially owns a controlling stake in one of two competing firms and may acquire a non-controlling or a controlling stake in a competitor, either directly using her own assets, or indirectly via the controlled firm. While industry profits are maximized within a symmetric two product monopoly, the investor attains this only in exceptional cases. Instead, she sometimes acquires a noncontrolling stake. Or she invests asymmetrically rather than pursuing a full takeover if she acquires a controlling one. Generally, she invests indirectly if she only wants to affect the product market outcome, and directly if acquiring shares is profitable per se.

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Bibliographic Info

Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2011-013.

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Date of creation: 2011
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Handle: RePEc:dgr:kubtil:2011013

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Web page: http://www.tilburguniversity.nl/tilec/

Related research

Keywords: Differentiated products; separation of ownership and control; private benefits;

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References

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  1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
  2. Patricia Charléty & Marie-Cécile Fagart & Saïd Souam, 2009. "Incentives for Partial Acquisitions and Real Market Concentration," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 508-534, September.
  3. Yohanes E. Riyanto & Linda A. Toolsema, 2004. "Tunneling and Propping: A Justification for Pyramidal Ownership," Econometric Society 2004 Far Eastern Meetings 639, Econometric Society.
  4. Foros, Øystein & Jarle Kind, Hans & Shaffer, Greg, 2011. "Mergers and partial ownership," European Economic Review, Elsevier, vol. 55(7), pages 916-926.
  5. Matthew J. Clayton & Bjorn N. Jorgensen, 2005. "Optimal Cross Holding with Externalities and Strategic Interactions," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1505-1522, July.
  6. Malueg, D.A., 1990. "Collusive Behavior And Partial Ownership Of Rivals," Papers 90-9, U.S. Department of Justice - Antitrust Division.
  7. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
  8. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  9. Victor Dorofeenko & Larry Lang & Klaus Ritzberger & Jamsheed Shorish, 2008. "Who controls Allianz?," Annals of Finance, Springer, vol. 4(1), pages 75-103, January.
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Cited by:
  1. Hunold, Matthias & Röller, Lars-Hendrik & Stahl, Konrad O, 2012. "Backwards Integration and Strategic Delegation," CEPR Discussion Papers 8910, C.E.P.R. Discussion Papers.

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