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Asset Ownership and Market Structure in Oligopoly


  • Joseph Farrell
  • Carl Shapiro


We study the effects of changes in the ownership or productive assets in a concentrated industry. Using a Cournot model, we analyze (1) investment by an oligopolist, (2) the sale of capital goods by one oligopolist to another, and (3) stock market purchases, whereby one firm acquires a partial interest in a rival firm. In each case, we determine how the change in asset ownership affects price, profits, industry performance, and measured concentration. We identify those industry conditions and asset transactions for which equilibrium increases in concentration reliably indicate worsened industry performance.

Suggested Citation

  • Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
  • Handle: RePEc:rje:randje:v:21:y:1990:i:summer:p:275-292

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    References listed on IDEAS

    1. A. Mitchell Polinsky, 1979. "Private versus Public Enforcement of Fines," NBER Working Papers 0338, National Bureau of Economic Research, Inc.
    2. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    3. Polinsky, A Mitchell & Shavell, Steven, 1989. "Legal Error, Litigation, and the Incentive to Obey the Law," Journal of Law, Economics, and Organization, Oxford University Press, vol. 5(1), pages 99-108, Spring.
    4. William M. Landes & Richard A. Posner, 1974. "The Private Enforcement of Law," NBER Working Papers 0062, National Bureau of Economic Research, Inc.
    5. Katz, Avery, 1990. "The effect of frivolous lawsuits on the settlement of litigation," International Review of Law and Economics, Elsevier, vol. 10(1), pages 3-27, May.
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