Question: consider two firms producing a homogeneous good and competing by...
Consider two firms producing a homogeneous good and competing by setting prices each period for an infinite number of periods. Each of the two firms owns a minority share k of its rival. This share is small so that each firm keeps full control of its own activities and decisions; the rival just receives share k of the firm’s profits.
Analyse how this pattern of cross-ownership affects the likelihood of collusion through the use of trigger strategies by the two firms. Is collusion more or less likely compared to the case of no cross-ownership?