Equilibrium Foreclosure and Complementary Products

Jeffrey Church and Neil Gandal

No 275574, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: In this paper we address the possibility of horizontal foreclosure in markets for complementary services (software) where the consumption value of durables (hardware) depends on the availability of software. Horizontal foreclosure occurs when a hardware firm merges with a software firm and the integrated firm ceases to supply compatible software for a rival technology. We find that horizontal foreclosure can be an equilibrium outcome where both the merger and compatibility decisions are part of a multistage game which permits the foreclosed firm to play a number of counter- strategies. Moreover, foreclosure may result in monopolization of the hardware market. We find that the foreclosure equilibrium is inefficient: total surplus would be higher without foreclosure.

Keywords: Financial Economics; Marketing (search for similar items in EconPapers)
Pages: 40
Date: 1993-03
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Equilibrium Foreclosure and Complementary Products (1993)
Working Paper: Equilibrium Foreclosure and Complementary Products (1993)
Working Paper: Equilibrium Foreclosure and Complementary Products (1993)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275574

DOI: 10.22004/ag.econ.275574

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