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| Rajeev K Tyagi |
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| ''On the commoditization of complementary markets'' |
| ( 2025, Vol. 45 No.3 ) |
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| A widely held view in strategy suggests that a firm with monopoly power in one market should seek to "commoditize" its complementary market. We examine the conditions under which this principle holds in a model where the complementary market features two vertically differentiated firms, and higher product quality entails higher per-unit production costs. We show that whether the monopolist chooses to commoditize the complementary market depends on the degree of heterogeneity in consumers' marginal valuation of quality, and on whether commoditization reduces production costs that are related or unrelated to quality. |
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| Keywords: Complementary good markets, vertical differentiation, commoditization, game theory. |
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L4 - Antitrust Issues and Policies: General |
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| Manuscript Received : Jul 16 2025 | | Manuscript Accepted : Sep 30 2025 |
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