Can Partial Horizontal Ownership Lessen Competition More Than a Monopoly?

14 Pages Posted: 4 Dec 2018 Last revised: 25 Jan 2019

See all articles by Duarte Brito

Duarte Brito

New University of Lisbon

Ricardo Ribeiro

Universidade Católica Portuguesa, Católica Porto Business School

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP)

Date Written: December 3, 2018

Abstract

In this paper we investigate the anti-competitive effects of partial horizontal ownership in a setting where: (i) two cost-asymmetric firms compete à la Cournot; (ii) managers deal with eventual conflicting interests of the different shareholders by maximizing a weighted sum of firms' operating profits; and (iii) weights result from the corporate control structure of the firm they run. Within this theoretical structure, we find that if the manager of the more efficient firm weights the operating profit of the (inefficient) rival more than its own profit, then partial ownership can lessen competition more than a monopoly.

Keywords: Partial Horizontal Ownership, Common-Ownership, Cross-Ownership, Full Joint Ownership, Duopoly, Cost Asymmetry

JEL Classification: L11, L12, L13, L41, L50

Suggested Citation

Brito, Duarte and Ribeiro, Ricardo and Vasconcelos, Helder, Can Partial Horizontal Ownership Lessen Competition More Than a Monopoly? (December 3, 2018). Economics Letters, Vol. 176, 2019 . Available at SSRN: https://ssrn.com/abstract=3295318 or http://dx.doi.org/10.2139/ssrn.3295318

Duarte Brito

New University of Lisbon ( email )

1099-085 Lisboa, 1099-085
Portugal

Ricardo Ribeiro (Contact Author)

Universidade Católica Portuguesa, Católica Porto Business School ( email )

Rua Diogo Botelho, 1327
Porto, 4169-005
Portugal
+351-22619-6200 (Phone)
+351-22619-6291 (Fax)

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Dr. Roberto Frias
s/n
4200-464 Porto, 4200-464
Portugal

HOME PAGE: http://www.fep.up.pt/docentes/hvasconcelos

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