Fuel diversification among firms and common ownership

Liu, Yi and Matsumura, Toshihiro (2025): Fuel diversification among firms and common ownership.

Abstract

We develop a duopoly model that incorporates fuel diversification, resulting in ex post cost asymmetry between firms. We theoretically examine how common ownership influences welfare. Our findings indicate that welfare decreases (increases) with the degree of common ownership when ex post cost heterogeneity due to fuel diversification is small (large). Furthermore, we identify a potential U-shaped relationship between the degree of common ownership and welfare, an insight not previously documented in the literature. In addition, we demonstrate that common ownership promotes fuel diversification, which may further enhance welfare.

• Item Type: MPRA Paper
• Language: English
• Keywords: overlapping ownership; welfare-improving production substitution; cost asymmetry; fuel choices
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources

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