Revisiting the Anticompetitive Effects of Common Ownership

61 Pages Posted: 9 Nov 2021

See all articles by Jose Azar

Jose Azar

Princeton University - Department of Economics

Xavier Vives

University of Navarra - IESE Business School; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: October 2021

Abstract

We use data from the U.S. airline industry to test the hypothesis, consistent with the general equilibrium oligopoly model of Azar and Vives (2021), that inter-industry common ownership should be associated with lower prices in product markets. We find that, as the model predicts, increases over time in intra-industry common ownership are associated with higher prices, while increases in inter-industry common ownership are associated with lower prices. The aggregate effect is nil. We also find that common ownership by the "Big Three" (BlackRock, Vanguard and State Street) is associated with lower airline prices, while common ownership by shareholders other than the Big Three is associated with higher prices. The results highlight the limitations of partial equilibrium oligopoly theory in the context of common ownership, and the need to consider a general equilibrium perspective.

Keywords: Antitrust, Common ownership, competition policy, General Equilibrium

Suggested Citation

Azar, Jose and Vives, Xavier, Revisiting the Anticompetitive Effects of Common Ownership (October 2021). CEPR Discussion Paper No. DP16612, Available at SSRN: https://ssrn.com/abstract=3960193

Jose Azar (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~jazar/

Xavier Vives

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

HOME PAGE: http://wwwapp.iese.edu/faculty/facultyDetail.asp?lang=en&prof=xv

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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