Cross-participated firms and welfare
The present study analyses the effects on social welfare of the existence of cross-participation at ownership level in a Cournot duopoly. We show that crossparticipation, despite it lowers the degree of competition by reducing total output and consumer surplus, may increases social welfare, provided that i) the firm owned by a single shareholder is less efficient than the other (cross-participated) firm; ii) the size of the market is neither too large nor too small. Therefore, the policy implication is that larger cross-participations at ownership level should be favoured, despite their anticompetitive nature, when the cross-participated firm is more efficient and the extent of the market is not too large.
|Date of creation:||11 Jan 2011|
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Indira Gandhi Institute of Development Research, Mumbai Working Papers
2010-015, Indira Gandhi Institute of Development Research, Mumbai, India.
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