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The Competitive Effects of Common Ownership: Economic Foundations and Empirical Evidence

37 Pages Posted: 26 Jul 2017  

Pauline Kennedy

Bates White Economic Consulting

Daniel P. O'Brien

Bates White Economic Consulting

Minjae Song

Bates White Economic Consulting

Keith Waehrer

Bates White Economic Consulting

Date Written: July 24, 2017

Abstract

A large fraction of US public stock is held by institutional investors that frequently hold shares in multiple firms in the same industry ("common ownership"). Concerns have been raised that common ownership might harm competition if it confers influence over important strategic decisions. Using data from the airline industry, we estimate the effects of common ownership on airline prices using price regressions and a structural oligopoly model consistent with the theory of partial ownership proposed in O'Brien and Salop (2000). Contrary to recent empirical research based on the same data, we find no evidence that common ownership raises airline prices.

Keywords: Price, concentration, common ownership, partial ownership, mergers

JEL Classification: D43, G23, G34, K21, L13, L41

Suggested Citation

Kennedy, Pauline and O'Brien, Daniel P. and Song, Minjae and Waehrer, Keith, The Competitive Effects of Common Ownership: Economic Foundations and Empirical Evidence (July 24, 2017). Available at SSRN: https://ssrn.com/abstract=3008331

Pauline Kennedy

Bates White Economic Consulting ( email )

2001 K St., NW
Suite 700
Washington, DC 20006
United States
2022161143 (Phone)

Daniel P. O'Brien (Contact Author)

Bates White Economic Consulting ( email )

1300 I Street NW
Washington, DC 20005
United States

Minjae Song

Bates White Economic Consulting ( email )

1300 I Street NW
Washington, DC DC 20005
United States
2027471404 (Phone)

Keith Waehrer

Bates White Economic Consulting ( email )

1300 I Street NW
Washington, DC 20005
United States

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