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Welfare Consequence of Common Ownership in a Vertically Related Market

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  • Linfeng Chen
  • Toshihiro Matsumura
  • Chenhang Zeng

Abstract

We investigate how common ownership affects welfare in a vertically related market. Although common ownership mitigates the double marginalization problem and improves welfare, it restricts competition among downstream firms and harms welfare. We find that whether common ownership is welfare‐improving depends on the degree of competitiveness in the downstream market. Common ownership is more likely to improve welfare when there are fewer downstream firms and a greater degree of product differentiation. In other words, common ownership may improve welfare when competition in the downstream market is weak.

Suggested Citation

  • Linfeng Chen & Toshihiro Matsumura & Chenhang Zeng, 2024. "Welfare Consequence of Common Ownership in a Vertically Related Market," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 996-1004, June.
    • Handle: RePEc:bla:jindec:v:72:y:2024:i:2:p:996-1004
    DOI: 10.1111/joie.12380
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    References listed on IDEAS

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    1. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 413-448, November.
    2. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," CESifo Working Paper Series 6908, CESifo.
    3. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    4. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
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    Cited by:

    1. Jansen, Jos, 2024. "Common ownership and information exchange in a duopoly," Economics Letters, Elsevier, vol. 243(C).

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