Partial passive ownership holdings destabilizing collusion

Abstract

In a homogenous good Cournot duopoly with linear demand, we demonstrate that partial passive ownership (PPO) holdings destabilize collusion as long as the bargaining power of the firm that owns stakes in its rival is not too high. Notably, if both firms have equal bargaining power during their negotiations over the surplus generated by collusion, an increase in PPO holdings always makes collusion less stable. Our findings have important policy implications for antitrust authorities.