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Common ownership and information exchange in a duopoly

Author

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  • Jansen, Jos

Abstract

I analyze effects of common ownership or cross-ownership on the incentives of Cournot competitors with close substitutes to exchange perfectly correlated information. Consistent with empirical findings, firms have stronger incentives to exchange information for greater degrees of common ownership. There is a trade-off for consumers. On the one hand, more common ownership relaxes competition, which hurts consumers. On the other hand, more common ownership may yield more information exchange, which benefits consumers. Consequently, positive degrees of common ownership may maximize the expected consumer (and total) surplus.

Suggested Citation

  • Jansen, Jos, 2024. "Common ownership and information exchange in a duopoly," Economics Letters, Elsevier, vol. 243(C).
    • Handle: RePEc:eee:ecolet:v:243:y:2024:i:c:s0165176524004154
    DOI: 10.1016/j.econlet.2024.111931
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    More about this item

    Keywords

    Common ownership; Cross-ownership; Duopoly; Information exchange; Common value; Consumer surplus;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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