TY - JOUR
T1 - Product boundary, vertical competition, and the double mark-up problem
AU - Cheng, Leonard K.
AU - Nahm, Jae
N1 - Funding Information:
Manuscript received July 16, 1999; accepted February 20, 2000. We wish to acknowledge the support of the Medical Research Council of Canada and the National Cancer Institute of Canada for the financial support of this work.
PY - 2007/6
Y1 - 2007/6
N2 - We develop a model in which a main product (called product A) provides a performance quality z by itself, whereas a complementary product (called product B) is useless by itself but enhances the main product's performance quality to q > z. This asymmetric complementarity gives rise to the following results. First, if z is relatively small, then firms A and B behave as if the products are symmetrically complementary with the usual double marginalization problem. Second, if z is sufficiently large, then firms A and B price their products as if they are independent. Third, over a certain range of intermediate z, no pure-strategy Nash equilibrium exists.
AB - We develop a model in which a main product (called product A) provides a performance quality z by itself, whereas a complementary product (called product B) is useless by itself but enhances the main product's performance quality to q > z. This asymmetric complementarity gives rise to the following results. First, if z is relatively small, then firms A and B behave as if the products are symmetrically complementary with the usual double marginalization problem. Second, if z is sufficiently large, then firms A and B price their products as if they are independent. Third, over a certain range of intermediate z, no pure-strategy Nash equilibrium exists.
UR - http://www.scopus.com/inward/record.url?scp=38349010460&partnerID=8YFLogxK
U2 - 10.1111/j.1756-2171.2007.tb00077.x
DO - 10.1111/j.1756-2171.2007.tb00077.x
M3 - Article
AN - SCOPUS:38349010460
SN - 0741-6261
VL - 38
SP - 447
EP - 466
JO - RAND Journal of Economics
JF - RAND Journal of Economics
IS - 2
ER -