David Gilo, Yossi Moshe, Yossi Spiegel
Partial Cross Ownership and Tacit Collusion
Preprint series: ESI preprints

MSC:

62P20 Applications to economics, See also {90Axx}

Abstract: This paper examines the effects that passive investments in rival firms have
on the incentives of firms to engage in tacit collusion. In general, these
incentives depend in a complex way on the entire partial cross ownership
(PCO) structure in the industry. We establish necessary and sufficient
conditions for PCO\ arrangements to facilitate tacit collusion and also
examine how tacit collusion is affected when firms' controllers make direct
passive investments in rival firms.

Keywords: partial cross ownership, repeated Bertrand oligopoly, tacit collusion, maverick firm, controlling shareholder