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Compatibility and Bundling with Generalist and Specialist Firms

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  • Denicolo, Vincenzo

Abstract

I analyze compatibility and bundling choices when one generalist firm offering both components of a system competes against two specialist firms each supplying one component only (but not the same one). I show that the generalist firm may have an incentive to choose incompatibility or engage in pure bundling when one component is less differentiated than the other. In this case, the system is more differentiated than the relatively undifferentiated component, and so under incompatibility the specialist firm that produces the undifferentiated component will relax price competition. This may result in higher profits for some of the competing firms. Copyright 2000 by Blackwell Publishing Ltd

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  • Denicolo, Vincenzo, 2000. "Compatibility and Bundling with Generalist and Specialist Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 177-188, June.
  • Handle: RePEc:bla:jindec:v:48:y:2000:i:2:p:177-88
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    Cited by:

    1. Kim, Sang-Hyun & Choi, Jay Pil, 2015. "Optimal compatibility in systems markets," Games and Economic Behavior, Elsevier, vol. 90(C), pages 106-118.
    2. Andrea Mantovani & Francisco Ruiz-Aliseda, 2016. "Equilibrium Innovation Ecosystems: The Dark Side of Collaborating with Complementors," Management Science, INFORMS, vol. 62(2), pages 534-549, February.
    3. Andrea Mantovani & Jan Vandekerckhove, 2016. "The Strategic Interplay Between Bundling and Merging in Complementary Markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(1), pages 19-36, January.
    4. Sue H. Mialon, 2014. "Product Bundling And Incentives For Mergers And Strategic Alliances," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 562-575, April.
    5. Eugen Kovac, 2004. "Tying by a Non-monopolist," CERGE-EI Working Papers wp225, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    6. Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 25-43, February.
    7. Oliver Budzinski & Katharina Wacker, 2007. "The Prohibition Of The Proposed Springer-Prosiebensat.1 Merger: How Much Economics In German Merger Control?," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 281-306.
    8. Reisinger, Markus, 2004. "The Effects of Product Bundling in Duopoly," Discussion Papers in Economics 477, University of Munich, Department of Economics.
    9. Matteo Alvisi & Emanuela Carbonara & Francesco Parisi, 2011. "Separating complements: the effects of competition and quality leadership," Journal of Economics, Springer, vol. 103(2), pages 107-131, June.
    10. SHIM, Sunghee & OH, Jungsuk, 2006. "Service Bundling and the Role of Access Charge in the Broadband Internet Service Market," MPRA Paper 3553, University Library of Munich, Germany.
    11. Sandro Shelegia, 2008. "Pricing Interrelated Goods in Oligopoly," Working Papers 014-08, International School of Economics at TSU, Tbilisi, Republic of Georgia.
    12. Ricardo Flores-Fillol & Rafael Moner-Colonques, 2011. "Endogenous Mergers of Complements with Mixed Bundling," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(3), pages 231-251, November.

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