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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.

Suggested Citation

  • Hattori, Keisuke & Lin, Ming Hsin, 2010. "Alliance Partner Choice in Markets with Vertical and Horizontal Externalities," MPRA Paper 25732, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25732
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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.
    2. Keisuke Hattori & Lin Ming Hsin, 2014. "Complementary Alliances in Composite Good Markets with Network Structure," Manchester School, University of Manchester, vol. 82(1), pages 33-51, January.

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    More about this item

    Keywords

    Complementary alliance; Parallel alliance; Nash bargaining; Antitrust policy;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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