Alliance Partner Choice in Markets with Vertical and Horizontal Externalities

Keisuke Hattori and Ming Hsin Lin

The B.E. Journal of Theoretical Economics, 2011, vol. 11, issue 1, 27

Abstract: This study investigates the choice between complementary and parallel alliances in a market with vertical and horizontal externalities. One composite goods firm competes with two components producers, each providing a complementary component of a differentiated composite good. Although the joint profits from a parallel alliance between the composite goods firm and a components producer are always larger than those from a complementary alliance between components producers, through Nash bargaining, a components producer prefers the complementary (parallel) alliance when the degree of product differentiation is sufficiently large (small). Combined with the result that a complementary alliance is socially preferable, our findings provide meaningful implications for antitrust policy.

Keywords: complementary alliance; parallel alliance; Nash bargaining; antitrust policy (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Working Paper: Alliance Partner Choice in Markets with Vertical and Horizontal Externalities (2010)
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DOI: 10.2202/1935-1704.1732

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