Common ownership in a delivered pricing duopoly

Abstract

This study investigates how common ownership affects the location choice of duopolists. We formulate a shipping (delivered pricing) model on the Hotelling line in which firms choose their locations and then compete in prices. We show that even if high prices due to common ownership do not reduce welfare under inelastic demand, common ownership can still lead to welfare loss by promoting dispersion among firms. We also find that common ownership promotes transport cost-reducing investments and accelerates welfare loss in excessive investments.