Ownership and Control in a Competitive Industry
ETH Zurich - Center for Law and Economics
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)
February 21, 2011
ZEW - Centre for European Economic Research Discussion Paper No. 11-071
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: 43
Keywords: Differentiated products, separation of ownership and control, private benefits of control
JEL Classification: L13, L41
Date posted: January 18, 2012
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