Buying Components

Matthieu Bouvard, Bruno Jullien and David Martimort

No 26-1699, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study how the organizational structure of producers affects competition between systems. We model systems as differentiated bundles of complementary components, where components within each system are produced either by a single firms (integration) or by two distinct firms (disintegration). When information about buyers' preferences is symmetric, disintegration typically increases prices and reduces total welfare as the less efficient system gains market share relative to integration. In addition, when buyers' preferences are private information, disintegration magnifies the quality distortions suppliers introduce to screen buyers and further reduces the market share of the more efficient system. Overall, the analysis suggests that technological standards that facilitate the combination of components from different suppliers can have adverse effects.

Keywords: Composite goods; suppliers organization; competition; double; marginalization. (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2025-11
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