An experiment on partial cross-ownership in oligopolistic markets |
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| Affiliation: | 1. Goethe-Universität Frankfurt, Theodor-W.-Adorno-Platz 4, Frankfurt 60323, Germany;2. Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine-Universität Düsseldorf, Universitätsstr. 1, Düsseldorf 40225, Germany;1. Sloan School of Management, Massachusetts Institute of Technology USA;2. Department of Economics and Rotman School of Management University of Toronto Canada;1. Economics Discipline Group, University of Technology Sydney, Australia;2. Department of Eonomics, Universidad Carlos 3 de Madrid, Spain |
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| Abstract: | We examine coordinated and unilateral effects of horizontal partial cross-ownership (PCO) in a laboratory experiment. We consider homogeneous Bertrand markets where firms have symmetric, non-controlling shares of each other, and conduct the experiment with both stranger and partner matching. The partner data (repeated game) confirm the prediction that firms are more (tacitly) collusive with PCO than without. In the stranger data (one-shot game), average prices are increasing with higher degrees of PCO. This is inconsistent with rather extreme Nash predictions for this setup. We show that in a Quantal Response Equilibrium firms’ incentives to compete are reduced with passive PCO. QRE predictions explain the data from the stranger treatment well. |
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