Ownership and Control in a Competitive Industry
40 Pages Posted: 27 Feb 2011
Date Written: February 21, 2011
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 noncontrolling 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