Asymmetric Complements in a Vertically Differentiated Market: Competition or Integration?

Authors

  • Ornella Tarola,

    1. DISSE, University of Rome ‘La Sapienza’
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  • Cecilia Vergari

    1. Department of Economics, University of Bologna
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    • We thank two anonymous referees for constructive criticisms. We also benefitted from useful comments from Jean J. Gabszewicz, Michele Grillo and Andrea Mantovani. Any remaining errors are ours.

Abstract

We study the effects of integration of asymmetric complements when they are vertically differentiated. While confirming the standard effects of integration, namely the internalization of the double marginalization externality and the reduction of competition, we point out a new positive quality effect, due to an increase in the average quality of the goods on sale. We also characterize the conditions under which integration turns out to be optimal for both firms' and consumers. We thus provide valuable directions for competition agencies when considering the joint ownership in vertically differentiated markets.

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