IDEAS home Printed from
   My bibliography  Save this paper

Free Entry under Common Ownership


  • Sato, Susumu
  • Matsumura, Toshihiro


This study investigates the equilibrium and welfare properties of free entry under common ownership. We formulate a model in which incumbents under common ownership choose whether to enter a new market. We find that an increase in common ownership reduces entries, which may or may not improve welfare. Welfare has an inverted-U shaped relationship with the degree of common ownership. However, if firms do not have common ownership before the entry, after entry common ownership harms welfare.

Suggested Citation

  • Sato, Susumu & Matsumura, Toshihiro, 2019. "Free Entry under Common Ownership," MPRA Paper 97525, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:97525

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    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. Newham, M. & Seldeslachts, J. & Banal-Estanol, A., 2018. "Common Ownership and Market Entry: Evidence from the Pharmaceutical Industry," Working Papers 18/03, Department of Economics, City University London.
    3. Gu, Yiquan & Wenzel, Tobias, 2009. "A note on the excess entry theorem in spatial models with elastic demand," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 567-571, September.
    4. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," CESifo Working Paper Series 6908, CESifo.
    5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    6. Ángel L. López & Xavier Vives, 2019. "Overlapping Ownership, R&D Spillovers, and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2394-2437.
    7. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    8. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 413-448, November.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Haraguchi, Junichi & Matsumura, Toshihiro, 2020. "Common Ownership among Private Firms and Privatization Policies," MPRA Paper 102152, University Library of Munich, Germany.
    2. Zormpas, Dimitrios & Ruble, Richard, 2021. "The dynamics of preemptive and follower investments with overlapping ownership," Journal of Economic Dynamics and Control, Elsevier, vol. 129(C).
    3. Hiroaki Ino & Toshihiro Matsumura, 2021. "Free entry under an output-cap constraint," Discussion Paper Series 229, School of Economics, Kwansei Gakuin University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2020. "Overlapping ownership, endogenous quality, and welfare," Economics Letters, Elsevier, vol. 190(C).
    2. Haraguchi, Junichi & Matsumura, Toshihiro, 2020. "Common Ownership among Private Firms and Privatization Policies," MPRA Paper 102152, University Library of Munich, Germany.
    3. Koch, Andrew & Panayides, Marios & Thomas, Shawn, 2021. "Common ownership and competition in product markets," Journal of Financial Economics, Elsevier, vol. 139(1), pages 109-137.
    4. Leonardos, Stefanos & Petrakis, Emmanuel & Skartados, Panagiotis & Stamatopoulos, Giorgos, 2021. "Partial passive ownership holdings and licensing," Economics Letters, Elsevier, vol. 204(C).
    5. Werner Neus & Manfred Stadler & Maximiliane Unsorg, 2020. "Market structure, common ownership, and coordinated manager compensation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1262-1268, October.
    6. Keisuke Hattori & Takeshi Yoshikawa, 2016. "Free entry and social inefficiency under co-opetition," Journal of Economics, Springer, vol. 118(2), pages 97-119, June.
    7. Toshihiro Matsumura & Yasunori Okumura, 2014. "Comparison between specific taxation and volume quotas in a free entry Cournot oligopoly," Journal of Economics, Springer, vol. 113(2), pages 125-132, October.
    8. Brekke, Kurt R. & Garcia Pires, Armando J. & Schindler, Dirk & Schjelderup, Guttorm, 2017. "Capital taxation and imperfect competition: ACE vs. CBIT," Journal of Public Economics, Elsevier, vol. 147(C), pages 1-15.
    9. Koptyug, Nikita & Persson, Lars & Tåg, Joacim, 2020. "Should we worry about the decline of the public corporation? A brief survey of the economics and external effects of the stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    10. Lysle Boller & Fiona Scott Morton, 2020. "Testing the Theory of Common Stock Ownership," NBER Working Papers 27515, National Bureau of Economic Research, Inc.
    11. Santhosh Ramalingegowda & Steven Utke & Yong Yu, 2021. "Common Institutional Ownership and Earnings Management," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 208-241, March.
    12. Gilje, Erik P. & Gormley, Todd A. & Levit, Doron, 2020. "Who's paying attention? Measuring common ownership and its impact on managerial incentives," Journal of Financial Economics, Elsevier, vol. 137(1), pages 152-178.
    13. Antonio Estache & Christophe Kieffer, 2021. "Does Common Ownership Influence the Financial Strategy of the French Pharmaceutical Firms?," Working Papers ECARES 2021-09, ULB -- Universite Libre de Bruxelles.
    14. Oz Shy & Rune Stenbacka, 2020. "Common ownership, institutional investors, and welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 706-723, July.
    15. Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2020. "Consumer salience and quality provision in (un)regulated public service markets," ZEW Discussion Papers 20-087, ZEW - Leibniz Centre for European Economic Research.
    16. David, Maia & Nimubona, Alain-Désiré & Sinclair-Desgagné, Bernard, 2011. "Emission taxes and the market for abatement goods and services," Resource and Energy Economics, Elsevier, vol. 33(1), pages 179-191, January.
    17. Lundberg, Alexander, 2015. "Non-monotonic network effects and market entry," Economics Letters, Elsevier, vol. 137(C), pages 146-149.
    18. Rey, Patrick & Salant, David, 2012. "Abuse of dominance and licensing of intellectual property," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 518-527.
    19. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    20. Stühmeier, Torben & Wenzel, Tobias, 2011. "Getting beer during commercials: Adverse effects of ad-avoidance," Information Economics and Policy, Elsevier, vol. 23(1), pages 98-106, March.

    More about this item


    Overlapping ownership; Free entry; Insufficient entry; Excessive entry; Circular markets;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:97525. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.