Skip to main content

Research Repository

Advanced Search

Losses from cross-holdings in a duopoly with convex cost and strategic input price determination

Mukherjee, Arijit

Losses from cross-holdings in a duopoly with convex cost and strategic input price determination Thumbnail


Authors

ARIJIT MUKHERJEE Arijit.Mukherjee@nottingham.ac.uk
Professor of Industrial Economics



Abstract

It is well-known that positive output externality on the outside firms is the reason for unprofitable passive cross-holding, which refers to a situation where a producer holds non-controlling shares in rival firms. Considering a final goods market with Cournot duopoly, where cross-holdings do not create positive output externality on the outside firms, we show that cross-holdings can be unprofitable under strategic input price determination by an input supplier if the final goods are produced with decreasing returns to scale technologies. Our results hold under symmetric and asymmetric cross-holdings. We show that cross-holdings can be unprofitable also under Bertrand duopoly in the final goods market. Thus, we provide a new reason for unprofitable passive cross-holdings. We also show the implications of a higher product differentiation on the profits and welfare.

Citation

Mukherjee, A. (2023). Losses from cross-holdings in a duopoly with convex cost and strategic input price determination. Economic Theory Bulletin, 11, 81-91. https://doi.org/10.1007/s40505-022-00241-3

Journal Article Type Article
Acceptance Date Dec 26, 2022
Online Publication Date Jan 24, 2023
Publication Date 2023-04
Deposit Date Jan 3, 2023
Publicly Available Date Jan 25, 2024
Journal Economic Theory Bulletin
Electronic ISSN 2196-1093
Publisher Springer Science and Business Media LLC
Peer Reviewed Peer Reviewed
Volume 11
Pages 81-91
DOI https://doi.org/10.1007/s40505-022-00241-3
Keywords Convex cost; Cross-holdings; Profit; Vertical structure
Public URL https://nottingham-repository.worktribe.com/output/15709179
Publisher URL https://link.springer.com/article/10.1007/s40505-022-00241-3

Files




You might also like



Downloadable Citations