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We examine asymmetric complementary good pricing under sequential moves when a price leader (firm A) produces a main product, whereas a price follower (firm B) produces an enhancer for the main product. We show that under sequential moves there is an additional pricing regime  	pseudo complements" besides the two cases obtained under simultaneous pricing, namely, (i) independent pricing" and (ii) bundling pricing." Under the pseudo complements regime, firm A behaves as if it is an independent monopolist, whereas firm B behaves as if the two products are strict complements. We characterize several properties of the pseudo complements regime. We show that the double mark-up problem persists in the pseudo complement regime. However, when firm A incorporates firm B's function into product A, it alleviates the double mark-up problem. We also explore how the main product's quality improvement affects the follower's R&amp;D incentives.

Asymmetric Complementary Goods Pricing under Sequential Moves