The effects of common ownership on price and quality decisions in competing supply chains

Abstract

This paper examines the implications of common ownership on pricing and quality decisions in supply chains. Our results indicate that the presence of common ownership enhances the quality investment but increases the wholesale price. However, the presence of common ownership induces the retailers to charge lower sales price. Because of higher wholesale price and lower sales price, the manufacturer always benefits from the common ownership but the common ownership always hurts the retailers. The presence of common ownership always benefits consumer surplus and social welfare. The benefits of common ownership are more significant as the common ownership level becomes strong.