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J. Church, Neil Gandal (1992)
Integration, Complementary Products and VarietyJournal of Economics and Management Strategy, 1
- Publisher
- Wiley
- Copyright
- Copyright © 2000 Wiley Subscription Services, Inc., A Wiley Company
- ISSN
- 1058-6407
- eISSN
- 1530-9134
- DOI
- 10.1111/j.1430-9134.2000.00025.x
- Publisher site
- See Article on Publisher Site
Abstract
We address the possibility of foreclosure in markets where the final good consists of a system composed of a hardware good and complementary software and the value of the system depends on the availability of software. Foreclosure occurs when a hardware firm merges with a software firm and the integrated firm makes its software incompatible with a rival technology or system. We find that foreclosure can be an equilibrium outcome where both the merger and compatibility decisions are part of a multistage game which permits the foreclosed hardware firm to play a number of counter‐strategies. Further, foreclosure can be an effective strategy to monopolize the hardware market.
Journal
Journal of Economics & Management Strategy – Wiley
Published: Mar 1, 2000