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Anti-Competitive Effects of Common Ownership

83 Pages Posted: 22 Apr 2014 Last revised: 27 Sep 2017

José Azar

University of Navarra, IESE Business School

Martin C. Schmalz

University of Michigan, Stephen M. Ross School of Business

Isabel Tecu

Charles River Associates (CRA)

Date Written: March 15, 2017

Abstract

Many natural competitors are jointly held by a small set of large institutional investors. In the US airline industry, taking common ownership into account implies increases in market concentration that are ten times larger than what is “presumed likely to enhance market power” by antitrust authorities. We find a robust correlation between within-route changes in common ownership concentration and route-level changes in ticket prices, also when we only use variation in ownership due to the combination of two large investors. We conclude that a hidden social cost – reduced product market competition – accompanies the private benefits of diversification and good governance.

Keywords: Competition, Ownership, Diversification, Pricing, Antitrust, Governance, Product Market

JEL Classification: L41, L10, G34

Suggested Citation

Azar, José and Schmalz, Martin C. and Tecu, Isabel, Anti-Competitive Effects of Common Ownership (March 15, 2017). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2427345 or http://dx.doi.org/10.2139/ssrn.2427345

José Azar (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Martin Schmalz

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan St
R5456
Ann Arbor, MI 48109-1234
United States
7347630304 (Phone)

HOME PAGE: http://https://sites.google.com/site/martincschmalz/

Isabel Tecu

Charles River Associates (CRA) ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

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