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Common Ownership with Downstream Firm's Voluntary Investment

Author

Listed:
  • Qing Hu

    (Kansai University)

  • Ryo Masuyama

    (Kushiro Public University of Economics)

  • Tomomichi Mizuno

    (Kobe University)

Abstract

It is well known that common ownership lessens competition, which tends to decrease consumer and total surpluses. This study challenges this well known result by introducing downstream firms' voluntary investment. We consider a vertical market with one upstream firm and two downstream firms, where the downstream firms engage in voluntary investment that can reduce the upstream firm's marginal cost. We show that common ownership may increase the consumer and total surpluses if the upstream marginal cost without investment is sufficiently high and the investment is sufficiently efficient. We also find our results are robust even in the market with two supply chains.

Suggested Citation

  • Qing Hu & Ryo Masuyama & Tomomichi Mizuno, 2025. "Common Ownership with Downstream Firm's Voluntary Investment," Discussion Papers 2520, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:2520
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    References listed on IDEAS

    as
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