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Cross-participated firms and welfare

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  • Luciano Fanti
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    Abstract

    The present study analyses the effects on social welfare of the existence of cross-participation at ownership level in a Cournot duopoly. We show that crossparticipation, despite it lowers the degree of competition by reducing total output and consumer surplus, may increases social welfare, provided that i) the firm owned by a single shareholder is less efficient than the other (cross-participated) firm; ii) the size of the market is neither too large nor too small. Therefore, the policy implication is that larger cross-participations at ownership level should be favoured, despite their anticompetitive nature, when the cross-participated firm is more efficient and the extent of the market is not too large.

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    Bibliographic Info

    Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2011/127.

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    Date of creation: 11 Jan 2011
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    Handle: RePEc:pie:dsedps:2011/127

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    Keywords: Cross-ownership; Duopoly; Social welfare.;

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    References

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    1. Juan Carlos Barcena-Ruiz & Norma Olaizola, 2007. "Cost-saving production technologies and partial ownership," Economics Bulletin, AccessEcon, vol. 15(6), pages 1-8.
    2. Bárcena Ruiz, Juan Carlos & Campo Corredera, María Luz, 2011. "Partial cross-ownership and strategic environmental policy," IKERLANAK, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I 2011-47, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    3. Rupayan Pal, 2010. "How Much Should You Own? Cross-ownership and Privatization," Working Papers id:2810, eSocialSciences.
    4. Rupayan Pal, 2010. "How much should you own? Cross-ownership and privatization," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-015, Indira Gandhi Institute of Development Research, Mumbai, India.
    5. repec:ebl:ecbull:v:15:y:2007:i:6:p:1-8 is not listed on IDEAS
    6. Macho, I. & Verdier, T., 1989. "Strategic Managerial Incentives and Cross Ownership Structure: A Note," DELTA Working Papers, DELTA (Ecole normale supérieure) 89-02, DELTA (Ecole normale supérieure).
    7. Philip M. Parker & Lars-Hendrik Roller, 1997. "Collusive Conduct in Duopolies: Multimarket Contact and Cross-Ownership in the Mobile Telephone Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 304-322, Summer.
    8. Trivieri, Francesco, 2007. "Does cross-ownership affect competition?: Evidence from the Italian banking industry," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 17(1), pages 79-101, February.
    9. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 45(2), pages 191-205, June.
    10. David Gilo & Yossi Moshe & Yossi Spiegel, 2006. "Partial cross ownership and tacit collusion," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 81-99, 03.
    11. Eirik S. Amundsen & Lars Bergman, 2002. "Will Cross-Ownership Re-Establish Market Power in the Nordic Power Market?," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 2), pages 73-95.
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