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Vertical differentiation with overlapping ownership

Author

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  • Li, Youping
  • Zhang, Jianhu
  • Zhou, Zipeng

Abstract

Existing studies on the competitive effects of overlapping ownership usually take the products sold by the firms as given. This paper focuses on the firms’ incentive for product innovation in a vertically differentiated market. We find that overlapping ownership, while reducing the low-quality firm’s incentive to improve product quality, can raise the high-quality firm’s. The degree of vertical differentiation is higher, but consumer and social welfare may increase compared with the case of independent ownership.

Suggested Citation

  • Li, Youping & Zhang, Jianhu & Zhou, Zipeng, 2023. "Vertical differentiation with overlapping ownership," Economics Letters, Elsevier, vol. 222(C).
    • Handle: RePEc:eee:ecolet:v:222:y:2023:i:c:s0165176522004219
    DOI: 10.1016/j.econlet.2022.110947
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    References listed on IDEAS

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    Cited by:

    1. Lømo, Teis Lunde, 2024. "Overlapping ownership, pass-through, and product differentiation," Economics Letters, Elsevier, vol. 237(C).
    2. Xingtang Wang & Leonard F. S. Wang & Huizhong Liu, 2024. "Cross-ownership and managerial delegation under vertical product differentiation," Journal of Economics, Springer, vol. 143(2), pages 161-181, October.

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    More about this item

    Keywords

    Overlapping ownership; Product innovation; Vertical differentiation; Welfare;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G3 - Financial Economics - - Corporate Finance and Governance

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