Ownership and Control in a Competitive Industry
40 Pages Posted: 10 Mar 2011 Last revised: 20 Apr 2011
There are 5 versions of this paper
Ownership and Control in a Competitive Industry
Ownership and Control in a Competitive Industry
Ownership and Control in a Competitive Industry
Ownership and Control in a Competitive Industry
Ownership and Control in a Competitive Industry
Date Written: March 10, 2011
Abstract
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.
Keywords: Differentiated Products, Separation of Ownership and Control, Private Benefits
JEL Classification: L13, L41
Suggested Citation: Suggested Citation