Discussion Paper Details

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Title: Free entry in a Cournot market with overlapping ownership

Author(s): Xavier Vives and Orestis Vravosinos

Publication Date: July 2022

Keyword(s): Common ownership, competition policy, cross ownership, Entry, minority shareholdings and oligopoly

Programme Area(s): Financial Economics and Industrial Organization

Abstract: We examine the effects of overlapping ownership in a Cournot oligopoly with free entry. If firms develop overlapping ownership only after entering, then an increase in the degree of overlapping ownership spurs entry but causes price to increase and total surplus to fall. Also, entry is never insufficient by more than one firm as in the case without overlapping ownership. If potential entrants have overlapping ownership before entering, then an increase in their degree of overlapping ownership can limit or spur entry. Although entry is excessive under non-decreasing returns to scale, with decreasing returns to scale entry is insufficient under high levels of overlapping ownership. Under common assumptions, we find that pre-entry (resp. post-entry) overlapping ownership magnifies (resp. alleviates) the negative impact of an increase of entry costs on entry.

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Bibliographic Reference

Vives, X and Vravosinos, O. 2022. 'Free entry in a Cournot market with overlapping ownership'. London, Centre for Economic Policy Research.