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Alliance Partner Choice in Markets with Vertical and Horizontal Externalities

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  • Hattori, Keisuke
  • Lin, Ming Hsin

Abstract

This study investigates the choice between complementary and parallel alliances in a market with vertical and horizontal externalities. One composite goods firm competes with two components producers, each providing a complementary component of a differentiated com- posite good. Although the joint profits from a parallel alliance between the composite goods firm and a components producer are always larger than those from a complementary alliance between components producers, through Nash bargaining, a components producer prefers the complementary (parallel) alliance when the degree of product differentiation is sufficiently large (small). Combined with the result that a complementary alliance is socially preferable, our findings provide meaningful implications for antitrust policy.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25732.

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Date of creation: 08 Oct 2010
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Handle: RePEc:pra:mprapa:25732

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Keywords: Complementary alliance; Parallel alliance; Nash bargaining; Antitrust policy;

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Cited by:
  1. Lin, Ming Hsin, 2012. "Airlines-within-airlines strategies and existence of low-cost carriers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(3), pages 637-651.

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