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Strategic capacity investment with common ownership

Author

Listed:
  • Domenico de Giovanni
  • Richard Ruble

    (EM - EMLyon Business School)

  • Dimitrios Zormpas

Abstract

We study how common ownership affects the magnitude and dynamics of investments in a duopoly. Followers exhibit less aggressive timing and quantity reactions because they internalize their effects on leaders. Leaders are therefore more likely to opt for a deterrence strategy, but their own internalization of followers softens their decisions. If firm roles are exogenous, high common ownership links lead to a relatively efficient staged investment outcome. Conversely, if firm roles are endogenous, high common ownership drives the winner of the preemption race to concede a "follower monopoly." Our numerical analysis finds that common ownership is generally detrimental to consumer surplus and welfare.

Suggested Citation

  • Domenico de Giovanni & Richard Ruble & Dimitrios Zormpas, 2025. "Strategic capacity investment with common ownership," Post-Print hal-05098376, HAL.
    • Handle: RePEc:hal:journl:hal-05098376
    DOI: 10.1016/j.ejor.2025.05.026
    as

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