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http://ssrn.com/abstract=1415925
 
 

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Complementing Substitutes: Bundling, Compatibility, and Entry


Emanuela Carbonara


University of Bologna - Department of Economics

Giuseppe Dari-Mattiacci


University of Amsterdam - Amsterdam Center for Law and Economics (ACLE); Tinbergen Institute

Francesco Parisi


University of Minnesota - Law School; University of Bologna

Matteo Alvisi


University of Bologna - Department of Economics

June 5, 2009

Amsterdam Center for Law & Economics Working Paper No. 2009-10

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.

Number of Pages in PDF File: 51

Keywords: complements, bundling, anticommons, antitrust, integration, vertical differentiation

JEL Classification: C7, D42, D43, K21, L11, L12, L13, L40, M21

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Date posted: July 1, 2009 ; Last revised: March 30, 2011

Suggested Citation

Carbonara, Emanuela and Dari-Mattiacci, Giuseppe and Parisi, Francesco and Alvisi, Matteo, Complementing Substitutes: Bundling, Compatibility, and Entry (June 5, 2009). Amsterdam Center for Law & Economics Working Paper No. 2009-10. Available at SSRN: http://ssrn.com/abstract=1415925 or http://dx.doi.org/10.2139/ssrn.1415925

Contact Information

Emanuela Carbonara
University of Bologna - Department of Economics ( email )
Piazza Scaravilli 2
Bologna, 40126
Italy
+39 051 2098149 (Phone)
+39 051 2098040 (Fax)
Giuseppe Dari-Mattiacci (Contact Author)
University of Amsterdam - Amsterdam Center for Law and Economics (ACLE) ( email )
Roeterstraat 11
Amsterdam, 1018WB
Netherlands
HOME PAGE: http://darimattiacci.acle.nl
Tinbergen Institute
Roetersstraat 31
Amsterdam, 1018 WB
Netherlands
HOME PAGE: http://scholar.google.com/citations?user=AuUfjxUAAAAJ&hl=en
Francesco Parisi
University of Minnesota - Law School ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
University of Bologna ( email )
Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
Matteo Alvisi
University of Bologna - Department of Economics ( email )
Strada Maggiore 45
Bologna, BO 40126
Italy
+39 051 2092646 (Phone)
+39 051 2092664 (Fax)
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