Mix-and-match compatibility in asymmetric system markets

Jong Hee Hahn, Sang Hyun Kim

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper shows that the private incentive for mix-and-match compatibility in system markets diverges from the social planner's incentive if competing suppliers are asymmetric in production cost or product quality. There can be too much or too little compatibility when the market is served by fully integrated system suppliers. Also, the market outcome involves socially too much incompatibility in the form of exclusive technological alliances when the market is composed of independent component suppliers. These results contrast with the standard one obtained in the symmetric setup and shed new light on public policy towards compatibility, technological alliances, and bundling practices in system markets.

Original languageEnglish
Pages (from-to)311-338
Number of pages28
JournalJournal of Institutional and Theoretical Economics
Volume168
Issue number2
DOIs
Publication statusPublished - 2012 Jun 1

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All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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