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Can cross-holdings benefit consumers?

Author

Listed:
  • Hao Cheng

    (Shenzhen MSU-BIT University)

  • Xiaoting Wu

    (Zhongnan University of Economics and Law)

  • Chenhang Zeng

    (Zhongnan University of Economics and Law)

Abstract

Common wisdom suggests that cross-holdings can lead to significant output contraction, and thus hurt consumers. On the contrary, we demonstrate that cross-holdings may increase industry output and benefit consumers in an asymmetric Cournot oligopoly with the presence of a welfare-maximizing tax/subsidy policy. The government will strategically use the tax/subsidy policy to regulate the market outcomes in anticipation of the adverse effect of cross-holdings, which could raise industry output and benefit consumers in certain situations depending on the cost distributions and cross-holding structures.

Suggested Citation

  • Hao Cheng & Xiaoting Wu & Chenhang Zeng, 2024. "Can cross-holdings benefit consumers?," Journal of Economics, Springer, vol. 141(3), pages 245-273, April.
    • Handle: RePEc:kap:jeczfn:v:141:y:2024:i:3:d:10.1007_s00712-023-00850-x
    DOI: 10.1007/s00712-023-00850-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Cross-holding; Tax/subsidy policy; Consumer surplus;
    All these keywords.

    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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