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.
JEL codes
- D43: Oligopoly and Other Forms of Market Imperfection
- L11: Production, Pricing, and Market Structure • Size Distribution of Firms
- L13: Oligopoly and Other Imperfect Markets
- L21: Business Objectives of the Firm
- L41: Monopolization • Horizontal Anticompetitive Practices
Reference
Xavier Vives, and Orestis Vravosinos, “Free entry in a Cournot market with overlapping ownership”, TSE Working Paper, n. 24-1544, June 2024.
See also
Published in
TSE Working Paper, n. 24-1544, June 2024