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Research Seminar in Economics Dimitrios Zormpas University of Crete

May 2, 2024: Dimitrios Zormpas (University of Crete)

Strategic capacity investment with overlapping ownership


We study how common ownership affects the magnitude and dynamics of investments in a duopoly. The timing and quantity reactions of followers are less aggressive because they internalize their effects on leaders. Leaders therefore act more aggressively and are more likely to opt for a deterrence strategy, though internalization of followers softens their decisions also. If firm roles are exogenous, higher common ownership links ultimately lead to an efficient outcome involving staged investments. If firm roles are endogenous higher common ownership eventually drives the winner of the preemption race to take a toehold so as to concede a monopoly position to the follower. In all cases our numerical analysis finds that common ownership is detrimental to consumer surplus and welfare.

Time and Location: 12.15–1.30 p.m. On-site: 202 Sitzungsraum / Kaminzimmer Boltzmannstr. 16-20 14195 Berlin-Dahlem