Endogenous partial cross-ownership in network industries

In this paper, we revisit the classical question of how partial passive cross-ownership (PPCO) influences competition in network industries. Contrary to conventional wisdom, our findings reveal that PPCO benefits firms only when ownership shares are of limited size, and in some cases, it may reduce profitability. These unconventional results are more likely to hold with higher network externality intensity and lower product compatibility. The work characterises the conditions on the model’s parameters and provides empirical and policy implications.