Tuesday, January 21, 2025
The Distribution of Common Ownership and Product Market Outcomes
The Distribution of Common Ownership and Product Market Outcomes
We study the relation between the distribution of common ownership in an industry, aggregate industry outcomes, and the distribution of market shares. We show that increasing the common owners' stake in a firm need not be anticompetitive and that industry profits can be higher in an industry with lower average common ownership. We also show that the equilibrium market structure is closely related to the distribution of sympathy coefficients, which measure the extent to which firm managers care about their rivals' profits and determine how aggressively firms compete. In particular, the ordering of product market shares is the inverse of the ordering of sympathy coefficients. Aggregate industry outcomes are determined not just by the average level of sympathy but also by the asymmetry of its distribution across firms.
https://lawprofessors.typepad.com/antitrustprof_blog/2025/01/the-distribution-of-common-ownership-and-product-market-outcomes.html
