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Partial Ownership and Foreclosure: An Empirical Analysis


  • Reiffen, David


This paper examines events associated with Union Pacific (UP) Railroad's attempt to obtain a significant minority share of the voting equity in Chicago Northwestern (CNW) Railroad. Rivals of UP petitioned the ICC to block the transaction, positing a theory of foreclosure that connects UP's partial ownership of CNW to reductions in both the rivals' profits and social welfare. This paper explores this theory's implications more generally and generates a testable implication for the UP/CNW transaction. I test for the predicted effect and find evidence contrary to the predictions of the rivals' theory, but consistent with other theories of partial ownership interests. Copyright 1998 by Kluwer Academic Publishers

Suggested Citation

  • Reiffen, David, 1998. "Partial Ownership and Foreclosure: An Empirical Analysis," Journal of Regulatory Economics, Springer, vol. 13(3), pages 227-244, May.
  • Handle: RePEc:kap:regeco:v:13:y:1998:i:3:p:227-44

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    References listed on IDEAS

    1. Maxwell, John W & Lyon, Thomas P & Hackett, Steven C, 2000. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 583-617, October.
    2. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
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    4. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 1-22.
    5. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    6. Stefanadis, Christodoulos, 2003. "Self-Regulation, Innovation, and the Financial Industry," Journal of Regulatory Economics, Springer, vol. 23(1), pages 5-25, January.
    7. B. Bortolotti & G. Fiorentini, 1997. "Barriers to Entry and the Self-Regulating Profession," Working Papers 291, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    9. Nunez, Javier, 2001. "A model of self-regulation," Economics Letters, Elsevier, vol. 74(1), pages 91-97, December.
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    Cited by:

    1. Fiocco, Raffaele, 2016. "The strategic value of partial vertical integration," European Economic Review, Elsevier, vol. 89(C), pages 284-302.
    2. Cooper, James C. & Froeb, Luke M. & O'Brien, Dan & Vita, Michael G., 2005. "Vertical antitrust policy as a problem of inference," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 639-664, September.

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