The Quality of Complex Systems and Industry Structure

40 Pages Posted: 3 Nov 2008

See all articles by Nicholas Economides

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

William Lehr

Columbia University

Date Written: February 1994

Abstract

The structure of the telecommunications industry has changed substantially in the last decade,raising public concern that the quality of our information infrastructure may be adversely affected. This paper extends the standard vertical differentiation model of imperfect competition to address the case of the choice of quality in complex systems. In these systems each demanded good consists of two complementary components whose quality may be set by competing firms. The extended framework is used to examine how changes in the vertical and horizontal structure of the industry affect the choice of compatibility, the overall system quality, the equilibrium market prices, and the allocation of surplus. The results from this analysis are interpreted in light of changes in the structure of the telecommunicationsindustry.

Suggested Citation

Economides, Nicholas and Lehr, William, The Quality of Complex Systems and Industry Structure (February 1994). NYU Working Paper No. EC-94-06, Available at SSRN: https://ssrn.com/abstract=1293114

Nicholas Economides (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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William Lehr

Columbia University

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New York, NY 10027
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