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Free Entry in a Cournot Market with Overlapping Ownership

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  • Xavier Vives
  • Orestis Vravosinos

Abstract

We examine the effects of overlapping ownership among existing firms deciding whether to enter a product market. We show that in most cases—and especially when overlapping ownership is already widespread—an increase in the extent of overlapping ownership will harm welfare by softening product market competition, reducing entry, and thereby (in contrast to standard results) inducing insufficient entry and magnifying the negative impact of an increase of entry costs on entry. Overlapping ownership can mostly be beneficial only under substantial increasing returns to scale, in which case industry consolidation (induced by overlapping ownership) leads to sizable cost efficiencies.

Suggested Citation

  • Xavier Vives & Orestis Vravosinos, 2025. "Free Entry in a Cournot Market with Overlapping Ownership," American Economic Journal: Microeconomics, American Economic Association, vol. 17(2), pages 292-320, May.
    • Handle: RePEc:aea:aejmic:v:17:y:2025:i:2:p:292-320
    DOI: 10.1257/mic.20230331
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    References listed on IDEAS

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    1. Chaim Fershtman & Ariel Pakes, 2000. "A Dynamic Oligopoly with Collusion and Price Wars," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 207-236, Summer.
    2. al-Nowaihi, A. & Levine, P. L., 1985. "The stability of the cournot oligopoly model: A reassessment," Journal of Economic Theory, Elsevier, vol. 35(2), pages 307-321, August.
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    Cited by:

    1. De Giovanni, Domenico & Ruble, Richard & Zormpas, Dimitrios, 2025. "Strategic capacity investment with common ownership," European Journal of Operational Research, Elsevier, vol. 327(1), pages 340-351.
    2. Jihwan Do & Jeremy Kettering, 2025. "The Value of Information in Oligopoly with Endogenous Entry," Working papers 2025rwp-253, Yonsei University, Yonsei Economics Research Institute.
    3. Cao, Zhigang & Li, Guopeng & Shen, Sixian & Zhu, Feng, 2025. "Potentials in quadratic Cournot cross-holding games," Journal of Mathematical Economics, Elsevier, vol. 119(C).
    4. Liu, Yi & Matsumura, Toshihiro, 2025. "Fuel diversification among firms and common ownership," MPRA Paper 125747, University Library of Munich, Germany.
    5. Qing Hu & Ryo Masuyama & Tomomichi Mizuno, 2025. "Common Ownership with Downstream Firm's Voluntary Investment," Discussion Papers 2520, Graduate School of Economics, Kobe University.
    6. Vives, Xavier & Vravosinos, Orestis, 2024. "Strategic complementarity in games," Journal of Mathematical Economics, Elsevier, vol. 113(C).

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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