Downstream Cross-Holdings and Upstream Collusion

19 Pages Posted: 13 Dec 2022

See all articles by Konstantinos Charistos

Konstantinos Charistos

University of Macedonia - Department of Economics

Ioannis Pinopoulos

National and Kapodistrian University of Athens - Department of Economics

Panagiotis Skartados

Department of Economics, University of Crete

Multiple version iconThere are 2 versions of this paper

Date Written: November 23, 2022

Abstract

We examine the effects of (passive) cross-holdings in the downstream market on the sustainability of upstream collusion. We consider two competing vertical chains with downstream Cournot and homogeneous goods. Each downstream firm holds a (symmetric) non-controlling share of its rival. We find that downstream cross-holdings (a) have a negative effect of on the collusive and punishment (competitive) profits (b) can increase profits from deviation. We use the linear demand to show that a higher degree of cross-holdings reduces upstream collusion. Our results are robust for a wide class of demand functions (that exhibit constant elasticity of slope).

Keywords: Competing vertical chains, cross-holdings, passive ownership, tacit collusion

JEL Classification: D43, L13, L40, L81

Suggested Citation

Charistos, Konstantinos and Pinopoulos, Ioannis and Skartados, Panagiotis, Downstream Cross-Holdings and Upstream Collusion (November 23, 2022). Available at SSRN: https://ssrn.com/abstract=4284859 or http://dx.doi.org/10.2139/ssrn.4284859

Konstantinos Charistos

University of Macedonia - Department of Economics ( email )

Thessaloniki, 54006
Greece

HOME PAGE: http://www.uom.gr

Ioannis Pinopoulos

National and Kapodistrian University of Athens - Department of Economics ( email )

1, Sofokleous Str
Athens, GR- 10559
Greece

Panagiotis Skartados (Contact Author)

Department of Economics, University of Crete ( email )

University Campus at Gallos
Rethymno, Crete
Greece

HOME PAGE: http://sites.google.com/view/pskartados

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