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Common ownership and entry with dominant firms and a competitive fringe

Author

Listed:
  • Keita Kamei

    (Department of Economics, Seinan Gakuin University)

Abstract

This note studies common ownership in an industry with a finite set of dominant quantity-setting firms and an endogenous competitive fringe with free entry under monopolistic competition. Common ownership among dominant firms is summarized by a reduced-form profit-internalization parameter that captures the extent to which managers internalize rivals' profits. Stronger internalization softens competition, lowers dominant-firm output, and induces additional entry of fringe varieties. Embedding this mechanism in a general equilibrium economy with separate workers and owners, where only owners receive firm profits, delivers a simple welfare benchmark. Under free entry, constant-elasticity-of-substitution demand, and Cobb-Douglas expenditure shares, stronger internalization raises the differentiated-goods price index and reduces owners' nominal income, implying that both groups' indirect utilities fall. Consequently, policies that reduce within-industry profit internalization are Pareto improving in this benchmark.

Suggested Citation

  • Keita Kamei, 2026. "Common ownership and entry with dominant firms and a competitive fringe," Economics Bulletin, AccessEcon, vol. 46(1), pages 285-292.
    • Handle: RePEc:ebl:ecbull:eb-26-00006
    as

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    References listed on IDEAS

    as
    1. José Azar & Martin C. Schmalz & Isabel Tecu, 2018. "Anticompetitive Effects of Common Ownership," Journal of Finance, American Finance Association, vol. 73(4), pages 1513-1565, August.
    2. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 141-153, June.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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