Clayton, Matthew J. and Jorgensen, Bjorn N. (2005) Optimal Cross Holding with Externalities and Strategic interactions. Journal of Business, 78 (4). pp. 1505-1522. ISSN 0740-9168
Full text not available from this repository.Abstract
We analyze a two period setting where firms first choose equity positions in each other and second engage in operating activities that cause externalities. Firms facing positive externalities optimally choose long equity positions to increase their profits. Firms facing negative externalities encounter a prisoners' dilemma, where each firm optimally chooses short positions in the first period, committing to a more aggressive operating stance that results in lower profits. In contrast to the prior literature, regulation restricting cross holdings reduces consumer surplus and economic welfare when the number of firms is fixed. However, such regulation can increase entry, improving net welfare.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.press.uchicago.edu/journals.html |
| Additional Information: | © 2005 The Authors |
| Divisions: | Accounting |
| Subjects: | H Social Sciences > HB Economic Theory |
| Date Deposited: | 07 Aug 2013 13:31 |
| Last Modified: | 08 Oct 2024 01:30 |
| URI: | http://eprints.lse.ac.uk/id/eprint/51341 |
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