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Passive cross holding as a strategic entry deterrence

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  • Li, Sanxi
  • Ma, Hongkun
  • Zeng, Chenhang

Abstract

This paper builds a duopoly model to study the strategic effects of cross holding on entry deterrence. We show that, in equilibrium, the incumbent optimally chooses strictly positive cross holdings in each other to deter entry for the potential entrant.

Suggested Citation

  • Li, Sanxi & Ma, Hongkun & Zeng, Chenhang, 2015. "Passive cross holding as a strategic entry deterrence," Economics Letters, Elsevier, vol. 134(C), pages 37-40.
    • Handle: RePEc:eee:ecolet:v:134:y:2015:i:c:p:37-40
    DOI: 10.1016/j.econlet.2015.06.006
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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