Advertising and Price Competition in the Presence of Overlapping Ownership

Abstract

While overlapping ownership among rival firms has usually been thought of as anticompetitive, we find that it may improve consumer and social welfare when its effect on advertising is incorporated. In a differentiated duopoly, this paper analyzes the firms' price and advertising strategies in the presence of overlapping ownership. Despite its price-enhancing effect, overlapping ownership causes the firms to advertise more, and in equilibrium more consumers make a purchase. The firms earn higher profits, and, under certain conditions, consumer and total social welfare are greater than in the case of independent ownership.