83 Pages Posted: 22 Apr 2014 Last revised: 27 Sep 2017
Date Written: March 15, 2017
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: 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