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Alliance Partner Choice in Markets with Vertical and Horizontal Externalities

  • Hattori, Keisuke
  • Lin, Ming Hsin

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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File URL: http://mpra.ub.uni-muenchen.de/25732/1/MPRA_paper_25732.pdf
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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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  1. John S. Heywood & Matthew McGinty, 2008. "Leading and Merging: Convex Costs, Stackelberg, and the Merger Paradox," Southern Economic Journal, Southern Economic Association, vol. 74(3), pages 879-893, January.
  2. Juan Bárcena-Ruiz, 2007. "Endogenous Timing in a Mixed Duopoly: Price Competition," Journal of Economics, Springer, vol. 91(3), pages 263-272, July.
  3. Encaoua, David & Moreaux, Michel & Perrot, Anne, 1996. "Compatibility and competition in airlines demand side network effects," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 701-726, October.
  4. Lin, Ming Hsin, 2004. "Strategic airline alliances and endogenous Stackelberg equilibria," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(5), pages 357-384, September.
  5. Zhang, Anming & Zhang, Yimin, 2006. "Rivalry between strategic alliances," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 287-301, March.
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  7. Lin, Ming Hsin, 2008. "Airline alliances and entry deterrence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(4), pages 637-652, July.
  8. Beggs, Alan W, 1994. "Mergers and Malls," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 419-28, December.
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  12. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  13. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  14. repec:ebl:ecbull:v:12:y:2005:i:4:p:1-11 is not listed on IDEAS
  15. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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  18. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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