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| Gökhan Can |
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| ''Losses from cross-ownership due to risk aversion'' |
| ( 2025, Vol. 45 No.3 ) |
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| This study analyzes a Cournot duopoly with two risk-averse firms facing demand uncertainty. Each firm passively holds a minority stake in the other's profits, introducing cross-ownership into a mean-variance framework. Cross-ownership reduces output and raises the expected price-cost margin. Its effect on expected total profits depends on the degree of risk aversion: with low risk aversion, expected total profits follow an inverted U-shape as cross-ownership increases; with high risk aversion, expected total profits decline. The reduction in expected total profits occurs when the rise in the expected price-cost margin fails to offset the output decline. |
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| Keywords: Cross-ownership, Cournot duopoly, risk aversion, demand uncertainty |
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
D4 - Market Structure and Pricing: General |
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| Manuscript Received : Apr 17 2025 | | Manuscript Accepted : Sep 30 2025 |
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