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Buying Components

Author

Listed:
  • Bouvard, Matthieu
  • Jullien, Bruno
  • Martimort, David

Abstract

We study how the organizational structure of producers affects competition between systems. We model systems as differentiated bundles of complementary components, where components within each system are produced either by a single firms (integration) or by two distinct firms (disintegration). When information about buyers' preferences is symmetric, disintegration typically increases prices and reduces total welfare as the less efficient system gains market share relative to integration. In addition, when buyers' preferences are private information, disintegration magnifies the quality distortions suppliers introduce to screen buyers and further reduces the market share of the more efficient system. Overall, the analysis suggests that technological standards that facilitate the combination of components from different suppliers can have adverse effects.

Suggested Citation

  • Bouvard, Matthieu & Jullien, Bruno & Martimort, David, 2025. "Buying Components," TSE Working Papers 26-1699, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:131250
    as

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    References listed on IDEAS

    as
    1. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    2. Martimort, David & Stole, Lars, 2012. "Representing equilibrium aggregates in aggregate games with applications to common agency," Games and Economic Behavior, Elsevier, vol. 76(2), pages 753-772.
    3. repec:hal:pseose:hal-00813181 is not listed on IDEAS
    4. Rochet, Jean-Charles, 1987. "A necessary and sufficient condition for rationalizability in a quasi-linear context," Journal of Mathematical Economics, Elsevier, vol. 16(2), pages 191-200, April.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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