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.
|Number of pages
|RAND Journal of Economics
|Published - 2007 Jun
Bibliographical noteFunding 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.
ASJC Scopus subject areas
- Economics and Econometrics