Anti-competitive effects of partial cross-ownership: Experimental evidence

•In a Cournot experiment non-controlling cross-ownership reduces competition.•Increasing the degree of cross-ownership significantly increases the product price.•The size of the price increase is substantial and relevant for anti-trust policy.•Cross-ownership may be a nudge to collusion among manage...

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Bibliographic Details
Published in:Journal of economic behavior & organization 2022-01, Vol.193, p.399-409
Main Authors: Hariskos, W., Königstein, M., Papadopoulos, K.G.
Format: Article
Language:English
Subjects:
Common ownership
Cournot experiment
Cross–ownership
Minority shareholdings
Silent financial interest
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Summary:•In a Cournot experiment non-controlling cross-ownership reduces competition.•Increasing the degree of cross-ownership significantly increases the product price.•The size of the price increase is substantial and relevant for anti-trust policy.•Cross-ownership may be a nudge to collusion among managers. In theory, partial cross-ownership affects product prices and consumer welfare negatively, but empirical evidence is highly controversial. For competition policy it is important whether such effects are substantial enough to cause action. We report a lab experiment on a Cournot duopoly with symmetric passive cross-ownership in which we increase the degree of cross-ownership from 10% (treatment LOW) to 40% (treatment HIGH). We find an increase in price that is substantial enough to be considered problematic from an anti-trust perspective. In addition we show that part of the price increase is caused by increasing collusion.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2021.11.027