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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2005-11.
Length: 30 pages
Date of creation: May 2005
Date of revision:
Other versions of this item:
- Guth, Werner & Nikiforakis, Nikos & Normann, Hans-Theo, 2007. "Vertical cross-shareholding: Theory and experimental evidence," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 25(1), pages 69-89, February.
- NEP-ALL-2005-09-11 (All new papers)
- NEP-COM-2005-09-11 (Industrial Competition)
- NEP-EXP-2005-09-11 (Experimental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dietzenbacher, Erik & Smid, Bert & Volkerink, Bjorn, 2000. "Horizontal integration in the Dutch financial sector," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(8), pages 1223-1242, December.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Guido Pepermans & Bert Willems, 2005.
"The Potential Impact of Cross-Ownership in Transmission: an Application to the Belgian Electricity Market,"
Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische StudiÃ«n
ces0503, Katholieke Universiteit Leuven, Centrum voor Economische StudiÃ«n.
- Guido Pepermans & Bert Willems, 2005. "The potential impact of cross-ownership in transmission: An application to the Belgian electricity market," Energy, Transport and Environment Working Papers Series, Katholieke Universiteit Leuven, Centrum voor Economische StudiÃ«n, Energy, Transport and Environment ete0501, Katholieke Universiteit Leuven, Centrum voor Economische StudiÃ«n, Energy, Transport and Environment.
- Durham, Yvonne, 2000. "An experimental examination of double marginalization and vertical relationships," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 207-229, June.
- Flath, David, 1991. "When is it rational for firms to acquire silent interests in rivals?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 9(4), pages 573-583, December.
- Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 313-22, September.
- Martin, Stephen & Normann, Hans-Theo & Snyder, Christopher M, 2001. "Vertical Foreclosure in Experimental Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 466-96, Autumn.
- Rick Harbaugh, 2001. "Equity Stakes and Hold-up Problems," Claremont Colleges Working Papers 2001-31, Claremont Colleges.
- Rey, Patrick & Tirole, Jean, 2003.
"A Primer on Foreclosure,"
IDEI Working Papers
203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
- John McLaren, 2000.
""Globalization" and Vertical Structure,"
American Economic Review,
American Economic Association, vol. 90(5), pages 1239-1254, December.
- McLaren, J., 1996. "'Globalization' and Vertical Structure," Discussion Papers, Columbia University, Department of Economics 1996_21, Columbia University, Department of Economics.
- John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
- Malueg, David A., 1992.
"Collusive behavior and partial ownership of rivals,"
International Journal of Industrial Organization, Elsevier,
Elsevier, vol. 10(1), pages 27-34, March.
- Malueg, D.A., 1990. "Collusive Behavior And Partial Ownership Of Rivals," Papers, U.S. Department of Justice - Antitrust Division 90-9, U.S. Department of Justice - Antitrust Division.
- Flath, David, 1989. "Vertical integration by means of shareholding interlocks," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 7(3), pages 369-380.
- Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
- Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 4(2), pages 141-153, June.
- Werner GÃ¼th & M. Vittoria Levati & Matteo Ploner, 2008.
"The Impact of Payoff Interdependence on Trust and Trustworthiness,"
German Economic Review, Verein fÃ¼r Socialpolitik,
Verein fÃ¼r Socialpolitik, vol. 9, pages 87-95, 02.
- M. Vittoria Levati & Matteo Ploner & Werner GÃ¼th, 2005. "The impact of payoff interdependence on trust and trustworthiness," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2005-19, Max Planck Institute of Economics, Strategic Interaction Group.
- Hunold, Matthias & Röller, Lars-Hendrik & Stahl, Konrad, 2012.
"Backwards integration and strategic delegation,"
ZEW Discussion Papers
12-022, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Werner GÃ¼th & Manfred Stadler, 2007. "Path dependence without denying deliberationâ€” a continuous transition model connecting teleology and evolution," Journal of Evolutionary Economics, Springer, Springer, vol. 17(1), pages 45-52, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karin Richter).
If references are entirely missing, you can add them using this form.