On the pro-competitive effects of passive partial backward ownership

Alipranti, Maria; Petrakis, Emmanuel; Skartados, Panagiotis

doi:10.1016/j.econlet.2022.110376

Cited by 5 publications

(6 citation statements)

References 22 publications

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“…Therefore, the output expansion effect of K firms is much more pronounced than under linear and discriminatory wholesale pricing; in addition, despite the fact that wT PT < w * , the output of (N − K ) firms is lower than under linear and discriminatory wholesale pricing (again, strategic substitutability explains this) but overall output is higher. These pro-competitive benefits are similar in nature to those obtained by Alipranti et al (2022) with discriminatory two-part tariffs.…”

Section: Appendix B: Comparative Statics Of Equilibrium Wholesale Pricessupporting

confidence: 64%

“…The recent literature on partial vertical integrations yields results which differ somewhat from full vertical mergers, as initially suggested by Baumol and Ordover (1994). This literature can be divided into two categories: one in which the partial acquisition gives the acquiring firm a controlling stake in its target, effectively allowing it to define prices (e.g., Brito et al 2016;Levy et al 2018), and another (to which this paper belongs) where the partial acquisition gives the acquirer a non-controlling stake in the target's capital, which, thus, does not allow it to influence the target's decisions (e.g., Greenlee and Raskovich 2006;Fiocco 2016;14 Hunold and Stahl 2016;Hunold and Schlutter 2019;Alipranti et al 2022).…”

Section: Related Literaturementioning

confidence: 99%

“…Brito et al (2016, Proposition 1) also find an anticompetitive effect when ownership shares are too different, as this leads to full foreclosure. On the other hand, Alipranti et al (2022) highlight possible procompetitive effects.…”

Section: Related Literaturementioning

confidence: 99%

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Backward Partial Vertical Integration Through Private Placement

Gonçalves

2023

J Ind Compet Trade

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We analyze the market impact of a partial vertical integration whereby a subset of retail firms acquire, through a private placement operation, a non-controlling stake in the capital of an upstream firm, which supplies an essential input. In addition, we assume that this upstream firm can price discriminate between the retail firms which (now) own a stake in its capital and all of their retail rivals. We find that price discrimination is optimal and, compared to a vertical separation scenario, there is input foreclosure, a higher retail price, and lower social welfare, which suggests that, from a competition policy viewpoint, such partial vertical integrations should be analyzed with particular concern. On the other hand, incentives are such that conducting a private placement operation of the upstream firm’s capital yields gains from trade, and we are able to identify the optimal characteristics of such an operation.

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Section: Appendix B: Comparative Statics Of Equilibrium Wholesale Pricessupporting

confidence: 64%

Section: Related Literaturementioning

confidence: 99%

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Backward Partial Vertical Integration Through Private Placement

Gonçalves

2023

J Ind Compet Trade

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“…It is being argued that cross share‐holding may yield harms to competition, however, social welfare may increase (Farrell & Shapiro, 1990). Several recent papers focusing on cross‐holding and its influences on R&D (López & Vives, 2019; Papadopoulos et al, 2019; Vives, 2020), investment portfolios (Shy & Stenbacka, 2020), product quality (Brito et al, 2020), licensing (Leonardos et al, 2021), and vertical structure (Alipranti et al, 2022; Chen et al, 2021), have enriched our understanding of cross‐holding in various aspects. Fanti and Buccella (2021) address that reciprocal cross‐ownership will solve prisoner's dilemma under appropriate degrees of product competition.…”

Section: Introductionmentioning

confidence: 99%

Vertical cross‐ownership, input price discrimination, and social welfare

Sun

Wang

2022

Int J of Economic Theory

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In this paper, we analyze the impact of vertical cross‐ownership with input price discrimination on social welfare. A higher degree of product differentiation will raise industry profit, consumer surplus, and social welfare; under forward cross‐ownership, a higher degree of cross‐ownership has the same effect, in addition, it will reduce rival firm's profit and increase upstream firm's profit; however, under backward cross‐ownership, a higher degree of cross‐ownership has an opposite effect. Furthermore, under Cournot and Bertrand competition, forward cross‐ownership will incentivize downstream firms to produce more via a lower input price, achieving the above effect.

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“…Note that on the one hand, in terms of cross ownership, some studies focus on the emergence of implicit collusion between managerial firms and examine the possibility of cross ownership resulting in collusion (Spagnolo, 2005;Gilo et al 2006), and others investigate the welfare effect of cross ownership under different ownership structure (Chen et al 2021;Hu et al 2021;Lestage, 2021;Li and Shuai, 2022;Alipranti et al 2022;Sun and Wang, 2022). On the other hand, the literature on strategic managerial delegation has grown significantly since the seminal contributions of Vickers (1985), Fershtman (1985), Fershtman andJudd (1987), andSklives (1987) (VFJS for shot), the outcome is that the sale delegation in Cournot market will lead to the "Prisoner's Dilemma" situation.…”

Section: Introductionmentioning

confidence: 99%