Product Differentiation, Demand Expansion and the Welfare Effects of Cross Ownership

Banerjee, Swapnendu; Mukherjee, Arijit; Poddar, Sougata

Abstract

We show the effects of cross ownership on product differentiation, consumer surplus and welfare under Cournot and Bertrand competition. Under Cournot competition, cross ownership increases (decreases) product differentiation if demand expansion following product differentiation is large (small). Under Bertrand competition, cross ownership may increase or decrease product differentiation regardless of the demand expansion effect of product differentiation. Cross ownership may increase consumer surplus and welfare under both Cournot and Bertrand competition. Demand expansion following product differentiation and the type of product-market competition play important roles for the effects of cross ownership in an industry with endogenous product differentiation. We also show that Cournot competition may create higher consumer surplus and welfare compared to Bertrand competition.

Citation

Banerjee, S., Mukherjee, A., & Poddar, S. (in press). Product Differentiation, Demand Expansion and the Welfare Effects of Cross Ownership. Canadian Journal of Economics,

• Journal Article Type: Article
• Acceptance Date: Aug 12, 2024
• Deposit Date: Sep 25, 2024
• Journal: Canadian Journal of Economics
• Print ISSN: 0008-4085
• Electronic ISSN: 1540-5982
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Keywords: Consumer surplus; Cross ownership; Demand expansion; Product differentiation; Welfare
• Public URL: https://nottingham-repository.worktribe.com/output/39991003