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 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, vol. 25(1), pages 69-89, February.
- NEP-ALL-2005-09-13 (All new papers)
- NEP-COM-2005-09-14 (Industrial Competition)
- NEP-EXP-2005-09-14 (Experimental Economics)
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