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faculty: "FEB" and publication year: "2009"
| Authors||M. Alvisi, E. Carbonara, G. Dari-Mattiacci, F. Parisi|
|Title||Complementing substitutes: bundling, compability, and entry|
|Publisher||ACLE, Universiteit van Amsterdam|
|Title series||Amsterdam Center for Law & Economics working paper|
|Faculty||Faculty of Economics and Business|
|Institute/dept.||FEB: Amsterdam Business School Research Institute (ABS-RI)|
|Abstract||In this paper we study price competition, equilibrium market configurations and entry when firms compete in vertically-di¤erentiated markets producing complementary goods. We consider two complements and start from a configuration where the market for one complement is a duopoly, whereas the other is a monopoly. In such framework, when products are highly di¤erentiated, the low-quality duopolist is always pushed out. We then allow for competition between complements on both sides of the market: one of the duopolists starts to produce also the other complement and decides whether to offer its two products as a bundle or to allow consumers to combine them with complements from other producers. We prove that this strategy always allows the low-quality duopolist to stay in the market, no matter if the duopolist producing both complements is the high or the low-quality one. Moreover, this strategy always increases consumer surplus, even when the duopolist sells the two complements only as a bundle.|
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