Ownership and Control in a Competitive Industry

H. Karle, T.J. Klein, K.O. Stahl

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Abstract

We study a differentiated product market in which an investor initially owns a controlling stake in one of two competing firms and may acquire a non-controlling or a controlling stake in a competitor, either directly using her own assets, or indirectly via the controlled firm. While industry profits are maximized within a symmetric two product monopoly, the investor attains this only in exceptional cases. Instead, she sometimes acquires a noncontrolling stake. Or she invests asymmetrically rather than pursuing a full takeover if she acquires a controlling one. Generally, she invests indirectly if she only wants to affect the product market outcome, and directly if acquiring shares is profitable per se.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Volume2011-026
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-026

Keywords

  • Differentiated products
  • separation of ownership and control
  • private benefits of control

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    Karle, H., Klein, T. J., & Stahl, K. O. (2011). Ownership and Control in a Competitive Industry. (CentER Discussion Paper; Vol. 2011-026). Econometrics.