Cross ownership and divestment incentives

Rune Stenbacka*, Geert Van Moer

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Even though cross ownership raises industry profits, we demonstrate that it is prone to a commitment problem. Specifically, we show that producers in a Cournot duopoly have unilateral incentives to resell their minority share-holdings in the rival to outside investors, leading to an equilibrium with complete divestments. This feature challenges the stability of cross ownership configurations.
Original languageEnglish
Article number109748
Peer-reviewed scientific journalEconomics letters
Volume201
Number of pages13
ISSN0165-1765
DOIs
Publication statusPublished - 12.02.2021
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics
  • Cross ownership
  • Divestment incentives

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Competition economics and service strategy - Quantitative consumer behaviour and competition economics

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