Separating Complements: The Effects of Competition and Quality Leadership

37 Pages Posted: 10 Nov 2009 Last revised: 19 Nov 2009

See all articles by Matteo Alvisi

Matteo Alvisi

University of Bologna - Department of Economics

Emanuela Carbonara

University of Bologna - Department of Economics

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Date Written: November 9, 2009

Abstract

The law and economics literature on the tragedy of the anticommons suggests that producers of complementary goods should integrate themselves. Recent decisions by the antitrust authorities seem to indicate that there is tradeoff between the “tragedy” and the lack of competition which might exist in an integrated market structure. In this paper we analyze such tradeoff in oligopolistic complementary markets when products are vertically differentiated. We show that quality leadership plays a crucial role. When there is a quality leader, forcing divestitures or prohibiting mergers, thus increasing competition, lowers prices and enhances consumer surplus. However, when quality leadership is shared, “disintegrating” firms may lead to higher prices. Therefore, concerns about the tragedy of the anticommons are well posed in antitrust policies.

Keywords: , anticommons, competition, mergers, vertical differentiation

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

Suggested Citation

Alvisi, Matteo and Carbonara, Emanuela and Parisi, Francesco, Separating Complements: The Effects of Competition and Quality Leadership (November 9, 2009). Minnesota Legal Studies Research Paper No. 09-43. Available at SSRN: https://ssrn.com/abstract=1502919 or http://dx.doi.org/10.2139/ssrn.1502919

Matteo Alvisi

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, BO 40126
Italy
+39 051 2092646 (Phone)
+39 051 2092664 (Fax)

Emanuela Carbonara

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy
+39 051 2098149 (Phone)
+39 051 2098040 (Fax)

Francesco Parisi (Contact Author)

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

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