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Complementary Goods: Prices and Consumer Welfare Under Duopoly and Monopoly

Author

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  • Oleksiy Andriychenko
  • Audrius Girnius
  • Atanu Saha

Abstract

We examine prices, profits, and consumer surplus for differentiated complementary goods under duopoly and a multi-product monopoly. We find that little can be said about the relative magnitudes of prices of the components of a system of complementary goods under the alternative market structures. Although demand complementarity can lead to lower prices for either the primary or the secondary good under monopoly, both prices are not necessarily lower. The results unique to this paper are that, when two complementary goods form a system, the system price is unambiguously lower and consumer surplus and profits are higher under a multi-product monopoly.

Suggested Citation

  • Oleksiy Andriychenko & Audrius Girnius & Atanu Saha, 2006. "Complementary Goods: Prices and Consumer Welfare Under Duopoly and Monopoly," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(3), pages 373-386.
  • Handle: RePEc:taf:ijecbs:v:13:y:2006:i:3:p:373-386
    DOI: 10.1080/13571510600961353
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    References listed on IDEAS

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    Cited by:

    1. Ming Chung Chang & Hsiao-Ping Peng, 2009. "Structure Regulation, Price Structure, Cross-Subsidization And Marginal Cost Of Public Funds," Manchester School, University of Manchester, vol. 77(6), pages 675-698, December.
    2. Ming Chang, 2010. "An Asymmetric Oligopolist can Improve Welfare by Raising Price," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(1), pages 75-96, February.
    3. Rajeev Goel, 2009. "Technological complementarities, demand, and market power," Netnomics, Springer, vol. 10(2), pages 161-170, October.
    4. Chang, Ming Chung & Lin, Yun-Chieh & Lin, Chiu Fen, 2012. "Comparing Cournot Duopoly And Monopoly With Asymmetric Differentiated Goods," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 53(2), pages 177-200, December.

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    Keywords

    Complements; Multi-Product Monopoly;

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