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| Author: | Gilbert, R. J. Riordan, M. H. |
| Title: | Product improvement and technological tying in a winner-take-all market |
| Journal: | Journal of Industrial Economics
2007 : MAR, VOL. 55:1, p. 113-139 |
| Index terms: | duopoly equilibrium analysis market structure product development technology vertical integration |
| Language: | eng |
| Abstract: | This paper analyzes product improvement and technological tying in special market conditions. In a winner-take-all duopoly where companies invest to develop their product, a vertically integrated monopoly supplier of a critical component may be in a position with incentives to exploit technological tying. There is an equilibrium in which the whole market is covered by the more efficient company, if the vertically integrated firm can't engage in technological tying. There is also a possibility for another equilibrium in which the less efficient company covers the entire market. For a vertically integrated firm technological tying is a means to forestall the competition. The implications to welfare in different equilibriums are discussed. |
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