Cross-ownership and excess capacity in a differentiated duopoly

ABSTRACT

This paper constructs a duopoly model considering cross-ownership, excess capacity and product differentiation, analyzes the impacts of cross-ownership and product differentiation, and reveals whether there is excess capacity and the optimal cross-ownership decision. The results show that cross-ownership, product differentiation, duopoly type, and shareholding mode have impacts on equilibrium outcomes. Excess, insufficient, and equilibrium capacity may all exist. It is the optimal strategy to hold the shares of the competitor to the greatest extent. In a specific oligopoly market and shareholding mode, the government should regulate cross-ownership.

KEYWORDS:

• Cross-ownership
• excess capacity
• duopoly
• product differentiation

JEL CLASSIFICATION:

• L11
• L13
• L52

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

The research is supported by the National Social Science Fund in the Later Stage of China [Grant number: 20FJYB066].