### Abstract

Original language | English |
---|---|

Pages (from-to) | 447-466 |

Number of pages | 20 |

Journal | The RAND Journal of Economics |

Volume | 38 |

Issue number | 2 |

DOIs | |

Publication status | Published - 1 Jun 2007 |

Externally published | Yes |

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### Cite this

*The RAND Journal of Economics*,

*38*(2), 447-466. https://doi.org/10.1111/j.1756-2171.2007.tb00077.x

}

*The RAND Journal of Economics*, vol. 38, no. 2, pp. 447-466. https://doi.org/10.1111/j.1756-2171.2007.tb00077.x

**Product boundary, vertical competition, and the double mark-up problem.** / CHENG, Kwok Hon, Leonard; NAHM, Jae.

Research output: Journal Publications › Journal Article (refereed)

TY - JOUR

T1 - Product boundary, vertical competition, and the double mark-up problem

AU - CHENG, Kwok Hon, Leonard

AU - NAHM, Jae

PY - 2007/6/1

Y1 - 2007/6/1

N2 - We develop a model in which a main product (called product A) provides a performance quality z by itself, whereas a complementary product (called product B) is useless by itself but enhances the main product's performance quality to q > z. This asymmetric complementarity gives rise to the following results. First, if z is relatively small, then firms A and B behave as if the products are symmetrically complementary with the usual double marginalization problem. Second, if z is sufficiently large, then firms A and B price their products as if they are independent. Third, over a certain range of intermediate z, no pure-strategy Nash equilibrium exists.

AB - We develop a model in which a main product (called product A) provides a performance quality z by itself, whereas a complementary product (called product B) is useless by itself but enhances the main product's performance quality to q > z. This asymmetric complementarity gives rise to the following results. First, if z is relatively small, then firms A and B behave as if the products are symmetrically complementary with the usual double marginalization problem. Second, if z is sufficiently large, then firms A and B price their products as if they are independent. Third, over a certain range of intermediate z, no pure-strategy Nash equilibrium exists.

UR - http://commons.ln.edu.hk/sw_master/1515

U2 - 10.1111/j.1756-2171.2007.tb00077.x

DO - 10.1111/j.1756-2171.2007.tb00077.x

M3 - Journal Article (refereed)

VL - 38

SP - 447

EP - 466

JO - RAND Journal of Economics

JF - RAND Journal of Economics

SN - 0741-6261

IS - 2

ER -