IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v72y2024i2p996-1004.html

Welfare Consequence of Common Ownership in a Vertically Related Market

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/joie.12380
    Download Restriction: no
    File URL: https://libkey.io/10.1111/joie.12380?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," CESifo Working Paper Series 6908, CESifo.
    2. 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.
    3. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    4. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 413-448, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emmanuel Petrakis & Panagiotis Skartados, 2022. "Vertical Opportunism, Bargaining, and Share-Based Agreements," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(4), pages 549-565, June.
    2. Nuowen Bai & Toshihiro Matsumura, 2023. "Common ownership in a delivered pricing duopoly," Journal of Economics, Springer, vol. 139(3), pages 191-208, August.
    3. Hirose, Kosuke & Matsumura, Toshihiro, 2023. "Green transformation in oligopoly markets under common ownership," Energy Economics, Elsevier, vol. 126(C).
    4. Hirose, Kosuke & Matsumura, Toshihiro, 2022. "Common ownership and environmental Corporate Social Responsibility," Energy Economics, Elsevier, vol. 114(C).
    5. Sato, Susumu & Matsumura, Toshihiro, 2020. "Free entry under common ownership," Economics Letters, Elsevier, vol. 195(C).
    6. 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.
    7. Hunold, Matthias & Schlütter, Frank, 2019. "Vertical financial interest and corporate influence," DICE Discussion Papers 309, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Werner Neus & Manfred Stadler & Maximiliane Unsorg, 2020. "Market structure, common ownership, and coordinated manager compensation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1262-1268, October.
    9. Gao, Lei & Han, Jianlei & Kim, Jeong-Bon & Pan, Zheyao, 2024. "Overlapping institutional ownership along the supply chain and earnings management of supplier firms," Journal of Corporate Finance, Elsevier, vol. 84(C).
    10. Hariskos, W. & Königstein, M. & Papadopoulos, K.G., 2022. "Anti-competitive effects of partial cross-ownership: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 399-409.
    11. Dasgupta, Amil & Fos, Vyacheslav & Sautner, Zacharias, 2021. "Institutional investors and corporate governance," LSE Research Online Documents on Economics 112114, London School of Economics and Political Science, LSE Library.
    12. Yue Feng & Junfeng Li, 2025. "Driving Corporate Green Investment: Investigating the Role of Common Ownership Along the Supply Chain in Environmental Sustainability," Sustainability, MDPI, vol. 17(17), pages 1-27, September.
    13. Xiaohui Wu & Yumin Li & Chong Feng, 2023. "Green innovation peer effects in common institutional ownership networks," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 641-660, March.
    14. Chen, Shenglan & Ma, Hui & Wu, Qiang & Zhang, Hao, 2023. "Does common ownership constrain managerial rent extraction? Evidence from insider trading profitability," Journal of Corporate Finance, Elsevier, vol. 80(C).
    15. Rosati, Nicoletta & Bomprezzi, Pietro & Martinez Cillero, Maria, 2024. "Critical dimensions in the empirical measurement of common shareholding," Research in International Business and Finance, Elsevier, vol. 70(PA).
    16. Lu, Yiming & Wang, Yu, 2024. "Firms and banks common ownership, economic policy uncertainty, and firms’ R&D investment: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    17. Felix Bühlmann & Caroline Ahler Christesen & Bruno Cousin & François Denord & Christoph Houman Ellersgaard & Paul Lagneau‐ymonet & Anton Grau Larsen & Mike Savage & Sylvain Thine & Kevin Young & Pedro, 2025. "Varieties of Economic Elites? Preliminary Results From the World Elite Database (WED)," Post-Print hal-05027410, HAL.
    18. Samuel Haas & Johannes Paha, 2021. "Non-Controlling Minority Shareholdings and Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(3), pages 431-454, May.
    19. Koptyug, Nikita & Persson, Lars & Tåg, Joacim, 2020. "Should we worry about the decline of the public corporation? A brief survey of the economics and external effects of the stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    20. Lee, Sang-Ho & Matsumura, Toshihiro & Sato, Susumu, 2017. "A New Approach to Free Entry Markets in Mixed Oligopolies: Welfare Implications," MPRA Paper 76450, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jindec:v:72:y:2024:i:2:p:996-1004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.