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Complementary Alliances in Composite Good Markets with Network Structure
Author(s) -
Hattori Keisuke,
Hsin Lin Ming
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2012.02335.x
Subject(s) - alliance , complementary good , component (thermodynamics) , composite number , industrial organization , complement (music) , business , economics , microeconomics , commerce , computer science , gene , law , thermodynamics , biochemistry , chemistry , physics , algorithm , complementation , political science , phenotype
This paper investigates the feasibility of full/partial complementary alliances in composite goods markets with network structure. There are multiple producers who each provide a complementary component of the composite good. In another related market, one single firm (a monopolist) produces another composite good which could be a substitute or complement of the composite good. The analysis shows that even a full alliance cannot be profitable when the number of producers is small and the two goods are close substitutes or complements. Moreover, none of the profitable alliances is stable, except the full alliance with two component producers.