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Advertising and Price Competition in the Presence of Overlapping Ownership

Author

Listed:
  • Changying Li
  • Youping Li
  • Jianhu Zhang

Abstract

While overlapping ownership among rival firms has usually been thought of as anticompetitive, we find that it may improve consumer and social welfare when its effect on advertising is incorporated. In a differentiated duopoly, this paper analyzes the firms' price and advertising strategies in the presence of overlapping ownership. Despite its price-enhancing effect, overlapping ownership causes the firms to advertise more, and in equilibrium more consumers make a purchase. The firms earn higher profits, and, under certain conditions, consumer and total social welfare are greater than in the case of independent ownership.

Suggested Citation

  • Changying Li & Youping Li & Jianhu Zhang, 2022. "Advertising and Price Competition in the Presence of Overlapping Ownership," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 178(1), pages 43-53.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2022-0003
    DOI: 10.1628/jite-2022-0003
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    Citations

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    Cited by:

    1. Jing Fang & Jingyi Huang & Chenhang Zeng, 2024. "Passive cross‐holdings, horizontal differentiation, and welfare," Bulletin of Economic Research, Wiley Blackwell, vol. 76(2), pages 508-528, April.
    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.

    More about this item

    Keywords

    overlapping ownership; advertising; welfare;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • G3 - Financial Economics - - Corporate Finance and Governance

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