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An experiment on partial cross-ownership in oligopolistic markets

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  • Benndorf, Volker
  • Odenkirchen, Johannes

Abstract

We examine coordinated and unilateral effects of horizontal partial cross-ownership (PCO) in a laboratory experiment. We consider homogeneous Bertrand markets where firms have symmetric, non-controlling shares of each other, and conduct the experiment with both stranger and partner matching. The partner data (repeated game) confirm the prediction that firms are more (tacitly) collusive with PCO than without. In the stranger data (one-shot game), average prices are increasing with higher degrees of PCO. This is inconsistent with rather extreme Nash predictions for this setup. We show that in a Quantal Response Equilibrium firms’ incentives to compete are reduced with passive PCO. QRE predictions explain the data from the stranger treatment well.

Suggested Citation

  • Benndorf, Volker & Odenkirchen, Johannes, 2021. "An experiment on partial cross-ownership in oligopolistic markets," International Journal of Industrial Organization, Elsevier, vol. 78(C).
  • Handle: RePEc:eee:indorg:v:78:y:2021:i:c:s0167718721000667
    DOI: 10.1016/j.ijindorg.2021.102773
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    More about this item

    Keywords

    Collusion; Competition; Antitrust; Minority shareholdings; Passive partial ownership; Experimental economics; Bounded rationality; Quantal response equilibrium;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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