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Welfare Consequence of Common Ownership in a Vertically Related Market

Author

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  • Linfeng Chen
  • Toshihiro Matsumura
  • Chenhang Zeng

Abstract

We investigate how common ownership affects welfare in a vertically related market. Although common ownership mitigates the double marginalization problem and improves welfare, it restricts competition among downstream firms and harms welfare. We find that whether common ownership is welfare‐improving depends on the degree of competitiveness in the downstream market. Common ownership is more likely to improve welfare when there are fewer downstream firms and a greater degree of product differentiation. In other words, common ownership may improve welfare when competition in the downstream market is weak.

Suggested Citation

  • Linfeng Chen & Toshihiro Matsumura & Chenhang Zeng, 2024. "Welfare Consequence of Common Ownership in a Vertically Related Market," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 996-1004, June.
    • Handle: RePEc:bla:jindec:v:72:y:2024:i:2:p:996-1004
    DOI: 10.1111/joie.12380
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    References listed on IDEAS

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    1. Schmalz, Martin, 2018. "Common Ownership Concentration and Corporate Conduct," CEPR Discussion Papers 12598, C.E.P.R. Discussion Papers.
    2. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 413-448, November.
    3. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
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    Cited by:

    1. Marc Escrihuela-Villar & Jorge Guillén, 2025. "On Cournot and Bertrand competition in collusive mixed oligopolies," Journal of Economics, Springer, vol. 144(3), pages 231-246, April.
    2. Jansen, Jos, 2024. "Common ownership and information exchange in a duopoly," Economics Letters, Elsevier, vol. 243(C).
    3. Qing Hu & Tomomichi Mizuno, 2025. "Welfare raising common ownership with supply chains," Discussion Papers 2521, Graduate School of Economics, Kobe University.
    4. Tsuritani, Ryosuke, 2025. "Common Ownership with Unlisted Suppliers of Perfectly Complementary Inputs," MPRA Paper 125003, University Library of Munich, Germany.
    5. Liu, Yi & Matsumura, Toshihiro, 2025. "Fuel diversification among firms and common ownership," MPRA Paper 125747, University Library of Munich, Germany.
    6. Toshihiro Matsumura & X. Henry Wang & Chenhang Zeng, 2025. "Welfare improving common ownership in successive oligopolies: The role of the input market," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(1), pages 169-192, February.
    7. Swapnendu Banerjee & Arijit Mukherjee & Sougata Poddar, 2025. "Product differentiation, demand expansion and the welfare effects of cross‐ownership," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(1), pages 193-226, February.
    8. Qing Hu & Ryo Masuyama & Tomomichi Mizuno, 2025. "Common Ownership with Downstream Firm's Voluntary Investment," Discussion Papers 2520, Graduate School of Economics, Kobe University.

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