Partial cross ownership and tacit collusion
AbstractThis paper shows how competing firms can facilitate tacit collusion by making passive investments in rivals. When firms are identical, only multilateral partial cross ownership (PCO) facilitates tacit collusion; the incentives of firms to collude in this case depend in a comlex way on the whole set of PCO in the industry. A firm's controller can facilitate tacit collusion further by investing directly in rival firms and by diluting his stake in his own firm. In the presence of cost asymmetries, even unilateral PCO of an efficient firm in a less efficient rival can facilitate tacit collusion.
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 335.
Date of creation: 11 Aug 2004
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partial cross ownership; tacit collusion; controlling shareholder; market sharing;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
- NEP-COM-2004-08-16 (Industrial Competition)
- NEP-MIC-2004-08-16 (Microeconomics)
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- Jeanine Thal, 2005.
"Optimal Collusion under Cost Asymmetry,"
2005-36, Centre de Recherche en Economie et Statistique.
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