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Cross-ownership in duopoly: Are there any incentives to divest?

Rupayan Pal & Emmanuel Petrakis

Economic Theory2025https://doi.org/10.1007/s00199-025-01638-4article
AJG 3ABDC A*
Weight
0.44

Abstract

This paper shows that in a duopoly a firm has no incentives to divest its passive shares in its rival when firms’ strategies are strategic complements. This holds independently whether goods are substitutes or complements and whether firms engage in simultaneous or sequential move product market competition. However, if firms’ strategies are strategic substitutes and are engaged in simultaneous move competition, it is optimal for both firms to fully divest their shares in their rivals under a private placement mechanism via independent intermediaries or under efficient competitive bidding. Yet, in the sequential move game only the follower has such incentives. Notably, under a private placement mechanism via a common intermediary, there are often circumstances under which there are partial or no firms’ divestment incentives, highlighting that the divestment mechanism employed by firms may have a crucial role on their divestment incentives.

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https://doi.org/https://doi.org/10.1007/s00199-025-01638-4

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@article{rupayan2025,
  title        = {{Cross-ownership in duopoly: Are there any incentives to divest?}},
  author       = {Rupayan Pal & Emmanuel Petrakis},
  journal      = {Economic Theory},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1007/s00199-025-01638-4},
}

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Cross-ownership in duopoly: Are there any incentives to divest?

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Evidence weight

0.44

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.32 × 0.4 = 0.13
M · momentum0.57 × 0.15 = 0.09
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.