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The effects of optimal cross holding in an asymmetric oligopoly

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  • Hongkun Ma
  • Chenhang Zeng

Abstract

This paper studies the endogenous formation of cross holding and its welfare implications in an asymmetric Cournot oligopoly with one acquiring firm holding passive ownership in one of its rivals. With the presence of cost asymmetry, we show that the acquiring firm will always choose to hold ownership in the most efficient rival. The optimal level of ownership is determined by market demand, the number, and cost distribution of firms. We further analyze the welfare implications of cross holding and characterize both socially excessive and insufficient cross holdings.

Suggested Citation

  • Hongkun Ma & Chenhang Zeng, 2022. "The effects of optimal cross holding in an asymmetric oligopoly," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 1053-1066, October.
    • Handle: RePEc:bla:buecrs:v:74:y:2022:i:4:p:1053-1066
    DOI: 10.1111/boer.12331
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    References listed on IDEAS

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    Cited by:

    1. Xingtang Wang & Leonard F. S. Wang, 2023. "Vertical shareholding, vertical product differentiation and social welfare," Metroeconomica, Wiley Blackwell, vol. 74(3), pages 478-494, July.

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