Abstract

http://ssrn.com/abstract=2198769
 
 

References (24)



 
 

Footnotes (27)



 


 



Product Differentiation Through Exclusivity: Is There a One‐Market‐Power‐Rent Theorem?


Benjamin E. Hermalin


University of California, Berkeley

Michael L. Katz


University of California, Berkeley - Economic Analysis & Policy Group

Spring 2013

Journal of Economics & Management Strategy, Vol. 22, Issue 1, pp. 1-27, 2013

Abstract:     
In systems industries, combinations of components are consumed together to generate user benefits. Arrangements among component providers sometimes limit consumers’ ability to mix‐and‐match components, and such exclusive arrangements have been highly controversial. We examine the competitive and welfare effects of exclusive arrangements among system components in a model of relatively differentiated applications that run on relatively undifferentiated platforms. We show that there is no “One‐Market‐Power‐Rent Theorem.” Specifically, exclusive deals with providers of differentiated applications can raise platforms’ margins without reducing applications’ margins, so that overall industry profits rise. Hence, for a given set of components and prices, exclusive arrangements can reduce consumer welfare by limiting consumer choice and raising equilibrium prices. In some cases, however, exclusivity can raise consumer welfare by increasing the equilibrium number of platforms, which leads to lower prices relative to the monopoly outcome that would prevail absent exclusivity.

Number of Pages in PDF File: 27

Accepted Paper Series





Date posted: January 10, 2013  

Suggested Citation

Hermalin, Benjamin E. and Katz, Michael L., Product Differentiation Through Exclusivity: Is There a One‐Market‐Power‐Rent Theorem? (Spring 2013). Journal of Economics & Management Strategy, Vol. 22, Issue 1, pp. 1-27, 2013. Available at SSRN: http://ssrn.com/abstract=2198769 or http://dx.doi.org/10.1111/jems.12008

Contact Information

Benjamin E. Hermalin (Contact Author)
University of California, Berkeley ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-7575 (Phone)
510-643-1420 (Fax)
Michael Louis Katz
University of California, Berkeley - Economic Analysis & Policy Group ( email )
Berkeley, CA 94720
United States
Feedback to SSRN


Paper statistics
Abstract Views: 142
Downloads: 2
References:  24
Footnotes:  27

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.391 seconds