Ownership and Control in a Competitive Industry

43 Pages Posted: 18 Jan 2012  

Heiko Karle

Frankfurt School of Finance and Management

Tobias J. Klein

Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER); IZA Institute of Labor Economics; Netspar; Tilburg Law and Economics Center (TILEC)

Konrad O. Stahl

University of Mannheim - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 5 versions of this paper

Date Written: February 21, 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: Di fferentiated products, separation of ownership and control, private benefits of control

JEL Classification: L13, L41

Suggested Citation

Karle, Heiko and Klein, Tobias J. and Stahl, Konrad O., Ownership and Control in a Competitive Industry (February 21, 2011). ZEW - Centre for European Economic Research Discussion Paper No. 11-071. Available at SSRN: https://ssrn.com/abstract=1987607 or http://dx.doi.org/10.2139/ssrn.1987607

Heiko Karle (Contact Author)

Frankfurt School of Finance and Management ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Tobias J. Klein

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

HOME PAGE: http://center.uvt.nl/staff/klein/index.html

Tilburg University - Center for Economic Research (CentER)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Konrad O. Stahl

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181 1875 (Phone)
+49 621 181 1874 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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