Partial equity ownership (PEO) between horizontally competing firms may have negative impacts on the society by increasing firms’ market power and weakening their competition. At the same time, PEO may also have positive impacts on the society by inducting knowledge transfer between competing firms and shifting outputs from a cost-ineffective firm to a cost-effective firm. As oligopoly models that explore the trade-off between these positive and negative impacts, we discuss the model of Ghosh and Morita (2017) that focuses on the link between PEO and knowledge transfer, and the model of Ara, Ghosh and Morita (2021) that focuses on the shift of outputs in international contexts, clarifying that process through which the level of PEO is endogenously determined in these models. We also discuss Akiyama’s (2021) model of joint venture (JV) in which two horizontally competing firms can establish a JV, exploring the process through which the ratio of JV’s equity ownership is endogenously determined. We discuss policy implications of these models.
