Working Paper: CEPR ID: DP16612
Authors: Xavier Vives; Jos Azar
Abstract: We use data from the U.S. airline industry to test the hypothesis, consistent with the general equilibrium oligopoly model of Azar and Vives (2021), that inter-industry common ownership should be associated with lower prices in product markets. We find that, as the model predicts, increases over time in intra-industry common ownership are associated with higher prices, while increases in interindustry common ownership are associated with lower prices. We also find that common ownership by the “Big Three” (BlackRock, Vanguard and State Street) is associated with lower airline prices, while common ownership by shareholders other than the Big Three is associated with higher prices. The results highlight the limitations of partial equilibrium oligopoly theory in the context of common ownership, and the need to consider a general equilibrium perspective.
Keywords: common ownership; antitrust; competition policy; general equilibrium
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| common ownership by big three asset managers (G34) | lower airline prices (L93) |
| common ownership by other shareholders (G34) | higher airline prices (L93) |
| intraindustry common ownership (L22) | higher airline prices (L93) |
| interindustry common ownership (L19) | lower airline prices (L93) |
| past values of common ownership (G32) | future prices (G13) |