Ownership and Control in a Competitive Industry
ETH Zurich - Center for Law and Economics; ETH Zurich
Tobias J. Klein
Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER); Institute for the Study of Labor (IZA); Netspar; Tilburg Law and Economics Center (TILEC)
Konrad O. Stahl
University of Mannheim - Department of Economics; Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. DP8277
We study a differentiated product market in which an investor initially owns a controlling stake in one of two competing firms and may acquire a non-controlling or a controlling stake in a competitor, either directly using her own assets, or indirectly via the controlled firm. While industry profits are maximized within a symmetric two product monopoly, the investor attains this only in exceptional cases. Instead, she sometimes acquires a non-controlling stake. Or she invests asymmetrically rather than pursuing a full takeover if she acquires a controlling one. Generally, she invests indirectly if she only wants to affect the product market outcome, and directly if acquiring shares is profitable per se.
Number of Pages in PDF File: 42
Keywords: Differentiated products, private benefits of control, separation of ownership and control
JEL Classification: L13, L41working papers series
Date posted: March 14, 2011
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