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Bertrand competition when firms hold passive ownership stakes in one another

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  • Shelegia, Sandro
  • Spiegel, Yossi

Abstract

We show that the Bertrand oligopoly model with cost asymmetries may admit multiple Nash equilibria when firms hold passive ownership stakes in each other. The equilibrium price may be as high as the monopoly price of the most efficient firm.

Suggested Citation

  • Shelegia, Sandro & Spiegel, Yossi, 2012. "Bertrand competition when firms hold passive ownership stakes in one another," Economics Letters, Elsevier, vol. 114(1), pages 136-138.
  • Handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:136-138
    DOI: 10.1016/j.econlet.2011.09.003
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. David Gilo & Yossi Moshe & Yossi Spiegel, 2006. "Partial cross ownership and tacit collusion," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 81-99, March.
    3. Blume, Andreas, 2003. "Bertrand without fudge," Economics Letters, Elsevier, vol. 78(2), pages 167-168, February.
    4. Malueg, David A., 1992. "Collusive behavior and partial ownership of rivals," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 27-34, March.
    5. Flath, David, 1991. "When is it rational for firms to acquire silent interests in rivals?," International Journal of Industrial Organization, Elsevier, vol. 9(4), pages 573-583, December.
    6. Dan Kovenock & Raymond J. Deneckere, 1996. "Bertrand-Edgeworth duopoly with unit cost asymmetry (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 1-25.
    7. Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 313-322, September.
    8. Dietzenbacher, Erik & Smid, Bert & Volkerink, Bjorn, 2000. "Horizontal integration in the Dutch financial sector," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1223-1242, December.
    9. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 191-205, June.
    10. Eirik S. Amundsen & Lars Bergman, 2002. "Will Cross-Ownership Re-Establish Market Power in the Nordic Power Market?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-95.
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    Citations

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    Cited by:

    1. Paha, Johannes & de Haas, Samuel, 2016. "Partial cross ownership and explicit collusion," Annual Conference 2016 (Augsburg): Demographic Change 145640, Verein für Socialpolitik / German Economic Association.
    2. repec:spr:epolin:v:44:y:2017:i:3:d:10.1007_s40812-016-0053-6 is not listed on IDEAS
    3. Samuel de Haas & Johannes Paha, 2016. "Partial cross ownership and collusion," MAGKS Papers on Economics 201632, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Heim, Sven & Hüschelrath, Kai & Laitenberger, Ulrich & Spiegel, Yossi, 2017. "Minority share acquisitions and collusion: Evidence from the introduction of national leniency programs," ZEW Discussion Papers 17-037, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    Bertrand oligopoly; Cost asymmetry; Partial cross ownership;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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