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 - The Leon Recanati Graduate School of Business Administration

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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 - The Leon Recanati Graduate School of Business Administration ( 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

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