New publication in International Journal of Industrial Organization: "An experiment on partial cross-ownership in oligopolistic markets"

03.08.2021

An experiment on partial cross-ownership in oligopolistic markets, Volker Benndorf, Johannes Odenkirchen, 2021, Journal of Industrial Organization, 78, 102773
doi.org/10.1016/j.ijindorg.2021.102773

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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