A Tale of Two Networks: Common Ownership and Product Market

(2018), that analyze oligopolistic behavior in the presence of common ownership.1 In response, antitrust authorities around the world including the Department of Justice, the Federal Trade Commission, the European Commission, and the OECD, have acknowledged concerns about the anticompetitive effects of common ownership.2 In this paper, we study the welfare cost of common ownership from a theoretic. [...] The reason is that the combination of the matrices Σ (the network of product market rivalry relationships that exists among the firms which is based on the substitutability of their products) and K (the network of ownership relationships based on the firms’ investor shares) can be conceptualized as the adjacency matrix of a weighted network. [...] We reduce the dimensionality of the dataset from 61,146 (the number of words in the HP’s vocabulary) to two and use the algorithm of Fruchterman and Reingold (1991, henceforth FR), which is widely used in network science to visualize weighted networks.8 Every publicly traded firm in 2004 is a dot in the each of the two panels of Figure 2. [...] As before, we reduce the dimensionality of the dataset from 3,126 (the number of investors) to two and use the FR algorithm to visualize the network in the right panel of Figure 2. [...] To investigate the evolution of the profit share in greater detail and to decompose the separate effects of oligopoly and common ownership we plot the profit share of total surplus under Cournot with and without common ownership in Figure 5.