Duopoly Competition with Common Shareholders

We develop a methodology for evaluating competition and welfare when shareholders hold (partial) positions in more than one competi-tor. We consider different models of product market competition and shareholder control. In each case, we derive consumer welfare as a function of shareholding Herfindahl indexes. We then apply our re-sults to estimate the effect on consumer welfare of Portugal Telecom’s (PT) divestiture of its subsidiary, PT Multimedia (PTM). Our results indicate that a sale to independent shareholders benefits consumers considerably compared to a sale to current shareholders, as proposed by PT. Moreover, the impact of the divestiture is drastically differ-ent depending on whether PT’s share is sold to PT’s shareholders or PTM’s shareholders