1 / 2016-08-12 16:40:46

Cross-Holdings in Cournot Duopoly with Asymmetric Information

11115,10142,11116,11117

When a firm increases its passive ownership in a rival firm, it is induced to take into
more consideration the effect of its output decision on the rival’s profit. This increased
consideration makes the firm compete less aggressively, a fact that is generally understood
for resulting in anticompetitive effects of passive cross-holdings. In this paper we
show that a firm may also be induced to compete less aggressively when its ownership
is passively held by a more efficient firm. In case with information asymmetry regarding
technologies, cross-holdings may make it desirable for both more efficient and less
efficient firms to reveal private information to each other. Our analysis helps to understand
the anti-competitive effects and incentive effect for private information revelation
of cross-holdings.