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Partial Cross Ownership and Tacit Collusion

34 Pages Posted: 25 Aug 2003  

David Gilo

Tel Aviv University - Buchmann Faculty of Law

Yossi Spiegel

Tel Aviv University, Coller School of Management; Centre for Economic Policy Research (CEPR); Centre for European Economic Research (ZEW)

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Abstract

This paper shows how competing firms can facilitate tacit collusion by making passive investments in rivals. In general, the incentives of firms to collude depend in a complex way on the whole set of partial cross ownership (PCO) in the industry. We establish necessary and sufficient conditions for PCO arrangements to facilitate tacit collusion and also examine how tacit collusion is affected when firms' controllers make direct passive investments in rival firms.

Keywords: partial cross ownership, repeated Bertrand oligopoly, tacit collusion, controlling shareholder, cost asymmetries

JEL Classification: D43, L41

Suggested Citation

Gilo, David and Spiegel, Yossi, Partial Cross Ownership and Tacit Collusion. RAND Journal of Economics, Vol. 37, No. 81-99, 2006. Available at SSRN: https://ssrn.com/abstract=422840 or http://dx.doi.org/10.2139/ssrn.422840

David Gilo (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
+972-3-6406299 (Phone)

Yossi Spiegel

Tel Aviv University, Coller School of Management ( email )

Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9063 (Phone)
972-3-640-7739 (Fax)

HOME PAGE: http://www.tau.ac.il/~spiegel

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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