On the commoditization of complementary markets

Rajeev Tyagi ()
Additional contact information
Rajeev Tyagi: University of California, Irvine

Economics Bulletin, 2025, vol. 45, issue 3, 1566 - 1572

Abstract: A widely held view in strategy suggests that a firm with monopoly power in one market should seek to "commoditize" its complementary market. We examine the conditions under which this principle holds in a model where the complementary market features two vertically differentiated firms, and higher product quality entails higher per-unit production costs. We show that whether the monopolist chooses to commoditize the complementary market depends on the degree of heterogeneity in consumers' marginal valuation of quality, and on whether commoditization reduces production costs that are related or unrelated to quality.

Keywords: Complementary good markets; vertical differentiation; commoditization; game theory. (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2025-09-30
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2025/Volume45/EB-25-V45-I3-P136.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-25-00358

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().