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Innovation, Rent Extraction, and Integration in Systems Markets

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Author Info
Joseph Farrell (Economics Department, University of California, Berkeley)
Michael Katz (Haas School of Business, Department of Economics, University of California, Berkeley)

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Abstract

We consider innovation incentives in markets where final goods comprise two strictly complementary components, one of which is monopolized. We focus on the case in which the complementary component is competitively supplied, and in which innovation is important. We explore ways in which the monopoly may have incentives to confiscate efficiency rents in the competitive sector, thus weakening or destroying incentives for independent innovation. We discuss how these problems are affected if the monopolist integrates into the competitive sector.

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File URL: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1027&context=iber/econ
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Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number 1027.

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Date of creation: 08 Jun 2000
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Handle: RePEc:cdl:econwp:1027

Note: oai:cdlib1:iber/econ-1027
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Keywords: L4; L1;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jay Pil Choi, 1995. "Preemptive R&D, Rent Dissipation and the "Leverage Theory"," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
    Other versions:
  2. Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," NBER Working Papers 6831, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Blackwell Publishing, vol. 40(1), pages 105-23, March. [Downloadable!] (restricted)
  4. Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721 Elsevier. [Downloadable!] (restricted)
  5. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn. [Downloadable!] (restricted)
  6. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-59, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nicholas Economides & Evangelos Katsamakas, 2004. "Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry," Working Papers 04-22, NET Institute, revised Aug 2004. [Downloadable!]
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  2. Luis Cabral & Ben Polak, 2007. "Dominant Firms, Imitation, and Incentives to Innovate," Working Papers 07-6, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  3. Joseph Farrell, 2003. "Integration and Independent Innovation on a Network," Department of Economics, Working Paper Series 1053, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  4. Chen, M. Keith & Nalebuff, Barry, 2006. "One-Way Essential Complements," Working Papers 22, Yale University, Department of Economics. [Downloadable!]
  5. Ramon Casadesus-Masanell & Barry Nalebuff & David B. Yoffie, 2007. "Competing Complements," Working Papers 07-44, NET Institute, revised Nov 2007. [Downloadable!]
  6. Kevin J. Boudreau & Andrei Hagiu, 2008. "Platform Rules: Multi-Sided Platforms as Regulators," Harvard Business School Working Papers 09-061, Harvard Business School. [Downloadable!]
  7. Luis Cabral & Ben Polak, 2004. "Does Microsoft Stifle Innovation? Dominant Firms, Imitation, and R & D Incentives," Working Papers 04-16, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
  8. Paul de Bijl & Martin Peitz, 2008. "Innovation, convergence and the role of regulation in the Netherlands and beyond," CPB Discussion Papers 108, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  9. Bijl, P.W.J. de & Peitz, M., 2007. "Innovation, Convergence and the Role of Regulation in the Netherlands," Discussion Paper 2007-016, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
  10. Aaron S. Edlin & Joseph Farrell, 2004. "The American Airlines Case: A Chance to Clarify Predation Policy," Law and Economics 0401003, EconWPA. [Downloadable!]
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  11. A. Banerji & Bhaskar Dutta, 2004. "Networks, Network Externalities and Market Segmentation," Working papers 124, Centre for Development Economics, Delhi School of Economics. [Downloadable!]
  12. Keith M. Chen & Barry Nalebuff, 2006. "One-Way Essential Complements," Levine's Bibliography 321307000000000669, UCLA Department of Economics. [Downloadable!]
    Other versions:
  13. Dennis W. Carlton & Joshua S. Gans & Michael Waldman, 2007. "Why Tie A Product Consumers Do Not Use?," NBER Working Papers 13339, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Boudreau, Kevin, 2006. "The Boundaries of the Platform: Vertical Integration and Economic Incentives in Mobile Computing," Working papers 30609, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  15. Steven J. Davis & Jack MacCrisken & Kevin M. Murphy, 2001. "Economic Perspectives on Software Design: PC Operating Systems and Platforms," NBER Working Papers 8411, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Annabelle Gawer & Rebecca Henderson, 2005. "Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel," NBER Working Papers 11852, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Andras Niedermayer, 2007. "On Platforms, Incomplete Contracts, and Open Source Software," Diskussionsschriften dp0707, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  18. Rey, Patrick & Seabright, Paul & Tirole, Jean, 2001. "The Activities of a Monopoly Firm in Adjacent Competitive Markets: Economic Consequences and Implications for Competition Policy," IDEI Working Papers 132, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2002. [Downloadable!]
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