Free Entry in a Cournot Market With Overlapping Ownership

85 Pages Posted: 4 Aug 2022 Last revised: 3 Jan 2024

See all articles by Xavier Vives

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)

Orestis Vravosinos

New York University - Department of Economics

Date Written: December 2, 2023

Abstract

We examine the effects of overlapping ownership among existing firms deciding whether to enter a product market. We show that in most cases—and especially when overlapping ownership is already widespread, an increase in the extent of overlapping ownership will harm welfare by softening product market competition, reducing entry, thereby (in contrast to standard results) inducing insufficient entry, and magnifying the negative impact of an increase of entry costs on entry. Overlapping ownership can mostly be beneficial only under substantial increasing returns to scale, in which case industry consolidation (induced by overlapping ownership) leads to sizable cost efficiencies.

Keywords: common ownership, cross-ownership, institutional ownership, minority shareholdings, oligopoly, entry, competition policy, antitrust

JEL Classification: D43, E11, L11, L13, L21, L41

Suggested Citation

Vives, Xavier and Vravosinos, Orestis, Free Entry in a Cournot Market With Overlapping Ownership (December 2, 2023). European Corporate Governance Institute – Finance Working Paper No. 854/2022, Available at SSRN: https://ssrn.com/abstract=4175664 or http://dx.doi.org/10.2139/ssrn.4175664

Xavier Vives (Contact Author)

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

Orestis Vravosinos

New York University - Department of Economics ( email )

19 West 4th Street
New York, NY 10003
United States

HOME PAGE: http://orestisvravosinos.netlify.app/

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