Transformations  in
Business & Economics

CROSS-OWNERSHIP AND CAPACITY SHARING UNDER PRODUCTION COMPETITION⁶
Zhendong Zou, Yiyi Shen, Chunyu Fu, Chaoqun Sun

ABSTRACT. This study considers cross-ownership, capacity sharing, and production competition modes in a duopoly model. We analyze the market equilibrium under different production competition modes and the enterprises' optimal cross-ownership decisions. A comparative analysis reveals the effects of capacity sharing and production competition modes under cross-ownership.
The results show that multiple factors affect the optimal cross-ownership decision, such as production competition mode, capacity constraints, capacity sharing, and the sharing price and costs. Either full or partial cross-ownership can be optimal; capacity sharing affects market entities and will occur only under certain conditions, which may not increase social welfare and cannot occur under Cournot competition. The production competition mode has complex effects on the equilibrium results. Under Stackelberg competition, when the sharing price is within a reasonable range, the optimal cross-ownership decision of the enterprise will increase social welfare. 

KEYWORDS:  cross-ownership, capacity sharing, production competitions, sharing price.

JEL classification:  L13, M11.

⁶Acknowledgement:  The research is supported by the Fundamental Research Funds for the Central Universities of China(Grant number: N2123006), the Education Department Project of Jilin Province (Grant number: JJKH20211238 SK), and the Humanities and Social Science Foundation of the Ministry of Education of China (Grant number: 17YJC710016).