Table of Contents
Economics Research International
Volume 2015 (2015), Article ID 324507, 7 pages
http://dx.doi.org/10.1155/2015/324507
Research Article

Partial Cross-Ownership, Cost Asymmetries, and Welfare

Department of Economics and Management, University of Pisa, Via Cosimo Ridolfi 10, 56124 Pisa, Italy

Received 9 July 2015; Accepted 19 October 2015

Academic Editor: Udo Broll

Copyright © 2015 Luciano Fanti. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The present study analyses the effects on social welfare of the existence of cross-participation at ownership level in a Cournot duopoly. We show that cross-participation, although it lowers the degree of competition by reducing total output and consumer surplus, may increase social welfare, provided that (i) the firm owned by a single shareholder is less efficient than the other (cross-participated) firm and (ii) the size of the market is not too large. Therefore, the policy implication is that larger cross-participations at ownership level should be favoured, despite their anticompetitive nature, when the cross-participated firm is relatively more efficient and the extent of the market is not too large.