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- Title
Incentive and welfare implications of cross-holdings in oligopoly.
- Authors
Ma, Hongkun; Qin, Cheng-Zhong; Zeng, Chenhang
- Abstract
Competitive implications of cross-holdings have been extensively analyzed in the literature. Incentives for engaging cross-holdings and welfare effects were however rarely studied. Although a similar logic as with the merger paradox holds for Cournot oligopolies with homogeneous products and symmetric technologies, we show that there are profit incentives for firms to engage cross-holdings with asymmetric technologies. Furthermore, we show that social welfare could be enhanced with cross-holdings even though the market becomes more concentrated. We also discuss the robustness of both the submodularity of the Cournot model with respect to the presence of cross-holdings and our results with respect to product differentiation.
- Subjects
OLIGOPOLIES; SOCIAL services; MERGERS &; acquisitions; NASH equilibrium; PRODUCT differentiation
- Publication
Economic Theory, 2024, Vol 77, Issue 4, p975
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-021-01398-x