A Nash-in-Nash Model of Corporate Control and Oligopolistic Competition under Common Ownership

This paper proposes a model of corporate control and oligopolistic competition under common ownership. Each firm’s conduct results from Nash bargaining (NB) among shareholders and firms play a Nash equilibrium in Nash bargains. NB encompasses a rich class of models of corporate control under common ownership, including the current canonical model due to O’Brien and Salop (2000, OS), which has however important deficiencies. A specification of NB overcomes these deficiencies and yields theoretical results and policy implications that contradict those derived under OS. I use Nash-in-Nash to study the competitive effects of changes in corporate control providing a rationale for a policy proposal requiring institutional investors to be passive