Revisiting the Anticompetitive Effects of Common Ownership

49 Pages Posted: 22 Mar 2021 Last revised: 10 Jun 2022

See all articles by José Azar

José Azar

University of Navarra, IESE Business School; CEPR; ECGI

Xavier Vives

University of Navarra - IESE Business School; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: March 15, 2021

Abstract

We use data from the U.S. airline industry to test the hypothesis, consistent with the general equilibrium oligopoly model of Azar and Vives (forthcoming), that inter-industry common ownership should be associated with lower prices in product markets. We find that, as the model predicts, increases over time in intra-industry common ownership are associated with higher prices, while increases in inter-industry common ownership are associated with lower prices. We also find that common ownership by the "Big Three" (BlackRock, Vanguard and State Street) is associated with lower airline prices, while common ownership by shareholders other than the Big Three is associated with higher prices. The results highlight the limitations of partial equilibrium oligopoly theory in the context of common ownership, and the need to consider a general equilibrium perspective.

Keywords: Common Ownership, Antitrust, Competition Policy, General Equilibrium

JEL Classification: L41, L10, G34, D50

Suggested Citation

Azar, José and Vives, Xavier, Revisiting the Anticompetitive Effects of Common Ownership (March 15, 2021). IESE Business School Working Paper , European Corporate Governance Institute – Finance Working Paper No. 827/2022, Available at SSRN: https://ssrn.com/abstract=3805047 or http://dx.doi.org/10.2139/ssrn.3805047

José Azar (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

CEPR ( email )

London
United Kingdom

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

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Xavier Vives

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

HOME PAGE: http://wwwapp.iese.edu/faculty/facultyDetail.asp?lang=en&prof=xv

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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