CEGE - Working Papers / Preprints
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Browsing CEGE - Working Papers / Preprints by Author "Brito, Duarte"
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- Overlapping ownership, endogenous quality, and welfarePublication . Brito, Duarte; Ribeiro, Ricardo; Vasconcelos, HelderThis paper investigates how overlapping ownership affects quality levels, consumer surplus, firms' profits and welfare when the industry is a vertically differentiated duopoly and quality choice is endogenous. This issue is particularly relevant since recent empirical evidence suggests that overlapping ownership constitutes an important feature of a multitude of vertically differentiated industries. We show that overlapping ownership while detrimental for welfare, may increase or decrease the quality gap, consumer surplus and firms' profits. In particular, when the overlapping ownership structure is such that the high quality firm places a positive weight on the low quality firm's profits, the incentives of the high quality firm to compete aggressively reduce. This may increase the equilibrium quality of the low quality firm, which in turn may lead to higher consumer surplus, despite higher prices.
- Quantifying the Coordinated Effects of Partial Horizontal AcquisitionsPublication . Brito, Duarte; Ribeiro, Ricardo; Vasconcelos, HelderThe growth of private-equity investment strategies in which rms often hold partial ownership interests in competing rms has led competition agencies to take an increased interest in as- sessing the competitive e¤ects of partial horizontal acquisitions. We propose a methodology to evaluate the coordinated e¤ects of such acquisitions on di¤erentiated products industries. The acquisitions may be direct and indirect, and may or not correspond to control. The method- ology, that nests full mergers, evaluates the impact on the range of discount factors for which coordination can be sustained. We provide an empirical application to several acquisitions in the wet shaving industry.