Complementary Alliances in Composite Good Markets with Network Structure

Authors

  • Keisuke Hattori,

    1. Osaka University of Economics
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  • Lin Ming Hsin

    1. Osaka University of Economics
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    • We would like to thank Noriaki Matsushima and anonymous referees for careful and constructive comments. This work was financially supported by the Japanese Ministry of Education, Culture, Sports, Science and Technology, Grant No. 21530242 and No. 22730210.

Abstract

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.

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