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Free entry in a Cournot market with overlapping ownership

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  • Vives, Xavier
  • Vravosinos, Orestis

Abstract

We examine the effects of overlapping ownership among existing firms deciding whether to enter a product market. We show that in most cases—and especially when overlapping ownership is already widespread, an increase in the extent of overlapping ownership will harm welfare by softening product market competition, reducing entry, thereby (in contrast to standard results) inducing insufficient entry, and magnifying the negative impact of an increase of entry costs on entry. Overlap-ping ownership can mostly be beneficial only under substantial increasing returns to scale, in which case industry consolidation (induced by overlapping ownership) leads to sizable cost efficiencies.

Suggested Citation

  • Vives, Xavier & Vravosinos, Orestis, 2024. "Free entry in a Cournot market with overlapping ownership," TSE Working Papers 24-1544, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:129418
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    References listed on IDEAS

    as
    1. Chaim Fershtman & Ariel Pakes, 2000. "A Dynamic Oligopoly with Collusion and Price Wars," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 207-236, Summer.
    2. al-Nowaihi, A. & Levine, P. L., 1985. "The stability of the cournot oligopoly model: A reassessment," Journal of Economic Theory, Elsevier, vol. 35(2), pages 307-321, August.
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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