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The impact on market outcomes of the portfolio selection of large equity investors

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  • Moreno, Diego
  • Petrakis, Emmanuel

Abstract

We study a setting in which several large investors select their portfolios of equity of the firms competing in a symmetric duopoly considering the impact of their interests on the managerial incentives. Assuming that investors objective is to maximize the value of their portfolios, we show that equilibrium portfolios will be symmetric, contributing to enhance the anticompetitive impact of the presence of large investors on price mark ups and profits.

Suggested Citation

  • Moreno, Diego & Petrakis, Emmanuel, 2021. "The impact on market outcomes of the portfolio selection of large equity investors," UC3M Working papers. Economics 33659, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:33659
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    References listed on IDEAS

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    1. José Azar & Martin C. Schmalz & Isabel Tecu, 2018. "Anticompetitive Effects of Common Ownership," Journal of Finance, American Finance Association, vol. 73(4), pages 1513-1565, August.
    2. José Azar & Xavier Vives, 2021. "General Equilibrium Oligopoly and Ownership Structure," Econometrica, Econometric Society, vol. 89(3), pages 999-1048, May.
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    4. Jan De Loecker & Jan Eeckhout & Gabriel Unger, 2020. "The Rise of Market Power and the Macroeconomic Implications [“Econometric Tools for Analyzing Market Outcomes”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 561-644.
    5. 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.
    6. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 141-153, June.
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    Cited by:

    1. Moreno, Diego & Petrakis, Emmanuel, 2022. "The impact on market outcomes of the portfolio selection of large equity investors," Economics Letters, Elsevier, vol. 212(C).

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    More about this item

    Keywords

    Market Power;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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