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Alliance Partner Choice in Markets with Vertical and Horizontal Externalities

  • Hattori Keisuke


    (Osaka University of Economics)

  • Lin Ming-Hsin


    (Osaka University of Economics)

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 composite 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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Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 11 (2011)
Issue (Month): 1 (June)
Pages: 1-27

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Handle: RePEc:bpj:bejtec:v:11:y:2011:i:1:n:13
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