Browsing by Author "Brito, Duarte"
Now showing 1 - 10 of 10
Results Per Page
Sort Options
- Can partial horizontal ownership lessen competition more than a monopoly?Publication . Brito, Duarte; Ribeiro, Ricardo; Vasconcelos, HelderIn this paper we investigate the anti-competitive effects of partial horizontal ownership in a setting where: (i) two cost-asymmetric firms compete a la Cournot; (ii) managers deal with eventual conflicting interests of the different shareholders by maximizing a weighted sum of the two firms' operating profits; and (iii) weights result from the corporate control structure of the firm they run. Within this theoretical structure, we find that if the manager of the more efficient firm weights the operating profit of the (inefficient) rival more than its own profit, then partial ownership will lessen competition more than a monopoly when both firms produce. (C) 2019 Elsevier B.V. All rights reserved.
- Measuring Unilateral Effects in Horizontal Partial AcquisitionsPublication . Brito, Duarte; Ribeiro, Ricardo; Vasconcelos, HélderRecent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions.We propose an empirical structural methodology to examine quantitatively the unilateral impact of partial horizontal acquisitions. The acquisitions may be direct or indirect, and may or may not correspond to control. The proposed methodology simulates the effects on prices,market shares, firm profits and consumer welfare. It can deal with differentiated product industries and nest full mergers as a special case. We provide an empirical application to several acquisitions in the wet shaving industry
- Modeling horizontal shareholding with ownership dispersionPublication . Brito, Duarte; Elhauge, Einer; Ribeiro, Ricardo; Vasconcelos, HelderThe dominantformulationformodelingtheobjectivefunctionofmanagersofcompeting rms withhorizontalshareholdinghasbeencritiquedforproducingtheresultthat,ifnon-horizontal shareholdersarehighlydispersed,managerswouldmimictheinterestsofhorizontalsharehold- ers eveniftheyownashareofthe rmthatdoesnotinducefullcontrol.Weshowthatthis issuecanbeavoided(whilemaintainingtheremainingfeaturesofthedominantapproach) withanalternativeformulationthatisderivedfromaprobabilisticvotingmodelthatassumes shareholderswithhigher nancialstakeswilltakegreaterinterestinthemanagerialactions, whichyieldstheresultthatmanagersmaximizeacontrol-weightedsumoftheshareholders relativereturns.
- Modelling the objective function of managers in the presence of overlapping shareholdingPublication . Brito, Duarte; Elhauge, Einer; Ribeiro, Ricardo; Vasconcelos, HelderThe objective function of managers in the presence of overlapping shareholding may differ from the traditional own-firm profit maximization, as they may internalize the externalities their strategies impose on other firms. The dominant formulation of the objective function in such cases has, however, been critiqued for yielding counter-intuitive profit weights when the ownership of non-overlapping shareholders is highly dispersed. In this paper, we examine this issue. First, we make use of a probabilistic voting model (in which shareholders vote to elect the manager) to microfound an alternative formulation of the objective function of managers, which solves the above-mentioned criticism. Second, we apply the two formulations to the set of S&P 500 firms. We show that ownership dispersion of non-overlapping shareholders is, in fact, a relevant empirical issue, which may induce an over-quantification of the profit weights computed from the dominant formulation, particularly under a proportional control assumption.
- 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, HelderRecent years have witnessed an increased interest, by competition agencies, in assessing the com- petitive e§ects of partial acquisitions. We propose an empirical structural methodology to quantify the coordinated e§ects of such acquisitions on di§erentiated products industries, by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained. The methodology can deal with settings involving all type of owners and ownership rights: owners that can be internal to the industry (rival Örms) and external to the industry; and ownership rights that can involve Önancial interests and corporate control, can be direct and indirect, can be partial or full. We provide an empirical application of our proposed methodology to several acquisitions in the wet shaving industry that give rise to cross- and common-ownership structures. The results seem to suggest that the incentives of (i) the acquiring partyís Örm to coordinate are non-decreasing after an acquisition (independently of whether it involves full or partial Önancial or corporate control rights, by internal or external owners), (ii) the acquired Örm to coordinate are non-decreasing after acquisitions involving full or partial corporate control rights, but non-increasing after acquisitions involving full or partial Önancial rights, and (iii) the remaining Örms in the industry to coordinate are non-increasing after an acquisition (again, independently of whether it involves full or partial Önancial or corporate control rights, by internal or external owners).
- 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.
- Quantifying the coordinated effects of partial horizontal acquisitionsPublication . Brito, Duarte; Ribeiro, Ricardo; Vasconcelos, HelderRecent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose an empirical structural methodology, which can deal with settings involving all types of owners and ownership rights, to quantify the coordinated effects of partial horizontal acquisitions on differentiated products industries, by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained. We also provide an empirical application of the methodology to several acquisitions in the wet shaving industry that give rise to cross- and common-ownership structures. The results are as follows (i) the incentives to coordinate of the firms that the acquiring party is – pre-acquisition – able to influence are non-decreasing with any acquisition; (ii) the incentives to coordinate of the acquired firm are non-decreasing with acquisitions involving full or partial both financial and corporate control rights, but non-increasing with acquisitions involving full or partial solely financial rights; and (iii) the incentives to coordinate of the remaining firms in the industry are non-increasing with any acquisition. This implies that the coordinated effects of partial horizontal acquisitions are, in general, ambiguous, which illustrates the importance of an empirical structural methodology.
- Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPIPublication . Brito, Duarte; Osório, António; Ribeiro, Ricardo; Vasconcelos, HélderRecent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization to a partial horizontal acquisition setting of the two most traditional indicators used to screen unilateral anti-competitive effects: the HeIndahl- Hirschman Index and the Gross Upward Price Pressure Index. The proposed generalized indicators can deal with all types of acquisitions that may lessen competition in the industry: acquisitions by owners that are internal to the industry (rival rms) and engage in cross-ownership, as well as acquisitions by owners that are external to the industry and engage in common-ownership. Furthermore, these indicators can deal with direct and indirect acquisitions, which may or may not correspond to control, and nest full mergers as a special case. We provide an empirical application to several acquisitions in the wet shaving industry. The results seem to suggest that (i) a full merger induces higher unilateral anti-competitive e¤ects than a partial controlling acquisition involving the same rms, (ii) a partial controlling acquisition induces higher unilateral anti-competitive e¤ects than a partial non-controlling acquisition involving the same and the same financial stakes, and (iii) an acquisition by owners that are internal to the industry induces higher unilateral anti-competitive effects than an acquisition (involving the same and the same stakes) by external owners that participate in more than one competitor.
- Unilateral effects screens for partial horizontal acquisitions: the generalized HHI and GUPPIPublication . Brito, Duarte; Osório, António; Ribeiro, Ricardo; Vasconcelos, HélderRecent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization of the two most traditional indicators used to screen unilateral anti-competitive effects - the Herfindahl–Hirschman Index and the Gross Upward Price Pressure Index - to partial horizontal acquisition settings. The proposed generalized indicators are endogenously derived under a probabilistic voting model in which the manager of each firm is elected in a shareholder assembly between two potential candidates who seek to obtain utility from an exogenous rent associated with corporate office. The model (i) can cope with settings involving all types of owners and rights: owners that can be internal to the industry (rival firms) and external to the industry; and rights that can capture financial and corporate control interests, can be direct and indirect, can be partial or full, (ii) yields an endogenous measure of the owners ultimate corporate control rights, and (iii) can also be used - in case the potential acquisition is inferred to likely enhance market power - to devise divestiture structural remedies. We also provide an empirical application of the two proposed generalized indicators to several acquisitions in the wet shaving industry, with the objective of providing practitioners with a step-by-step illustration of how to compute them in antitrust cases.