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The Competitive Effects of Common Ownership: Economic Foundations and Empirical Evidence

Pauline Kennedy, Daniel P. O'Brien, Minjae Song, and Keith Waehrer
July 26, 2017

A large fraction of US public stock is held by institutional investors that frequently hold shares in multiple firms in the same industry ("common ownership''). Concerns have been raised that common ownership might harm competition if it confers influence over important strategic decisions. This paper estimates the effects of common ownership specifically on airline prices using price regressions and a structural oligopoly model consistent with the theory of partial ownership. Contrary to recent empirical research based on the same data, the authors find no evidence that common ownership raises airline prices. 

The paper builds on earlier work that discusses methodological issues that arise in evaluating the competitive effects of common ownership that involving minority shareholdings.