Resource title

Partial cross ownership and tacit collusion

Resource image

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Resource description

This paper shows how competing firms can facilitate tacit collusion by making passive investments in rivals. In general, the incentives of firms to collude depend in a complex way on the whole set of partial cross ownership (PCO) in the industry. We show that when firms are identical, only multilateral PCO may (but need not) facilitate tacit collusion. A firm?s controller can facilitate tacit collusion further by investing directly in rival firms and by diluting his stake in his own firm. In the presence of cost asymmetries, even unilateral PCO by efficient firms in a less efficient rival can facilitate tacit collusion.

Resource author

Yossi Spiegel, David Gilo

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/23467

Resource license

Adapt according to the presented license agreement and reference the original author.