Price Competition, Essentiality and Network Externalities with Complementary Goods: New Solutions to the 'Tragedy of the Anticommons'

Rivista Internazionale di Scienze Sociali, No. 3, 2008

27 Pages Posted: 8 Jul 2009 Last revised: 6 Sep 2010

See all articles by Matteo Alvisi

Matteo Alvisi

University of Bologna - Department of Economics

Date Written: November 12, 2008

Abstract

The presence of multiple sellers in the provision of (non-substitutable) complementary goods leads to outcomes that are worse than those generated by an integrated monopoly, a problem also known as "tragedy of the anticommons". In this paper we identify some conditions under which the tragedy is solved and a complementary oligopoly is preferable to a multiproduct monopoly. First, we introduce several substitutes for each complement and determine their minimum number for the result to hold. Second, we study asymmetric complementarity and the presence of essential goods, stressing the role of the degree of differentiation across substitutes for the persistence of the "double mark-up" problem. Third, we verify whether the inefficiency result holds in dynamic terms, discussing the adoption of new technological standards in complementary oligopolies. The focus will be on indirect network externalities, checking under which conditions an inefficient standard emerges or the market becomes "locked-in" in an old one.

Note: Downloadable document is in Italian.

Keywords: Complementary Goods, Oligopoly, Antitrust, Price Competition, Anticommons, Integration, Compatibility, Technological Standard, Network Externality

JEL Classification: D43, D62, K21, L13, L15

Suggested Citation

Alvisi, Matteo, Price Competition, Essentiality and Network Externalities with Complementary Goods: New Solutions to the 'Tragedy of the Anticommons' (November 12, 2008). Rivista Internazionale di Scienze Sociali, No. 3, 2008, Available at SSRN: https://ssrn.com/abstract=1300325

Matteo Alvisi (Contact Author)

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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