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On the Desirability of Compatibility with Product Selection

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  • Anette Boom

Abstract

The paper analyses a three‐stage game where two integrated system suppliers first decide whether to provide compatible system components, then choose the product specifications of their two offered components, and finally set prices. Contrary to results with exogenous product characteristics, the achievement of compatibility does not improve social welfare here. Given the assumed distribution of the consumers’ preferences on the product space, consumers’ losses from the changed product designs under compatibility outweigh the gains from these changes and from the availability of two additional system goods. Nevertheless, one firm ensures compatibility, if compatibility costs do not exceed a certain threshold.

Suggested Citation

  • Anette Boom, 2001. "On the Desirability of Compatibility with Product Selection," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 85-96, March.
    • Handle: RePEc:bla:jindec:v:49:y:2001:i:1:p:85-96
    DOI: 10.1111/1467-6451.00139
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    Cited by:

    1. Jong-Hee Hahn & Sang-Hyun Kim, 2012. "Mix-and-Match Compatibility in Asymmetric System Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 311-338, June.
    2. Esteves, Rosa-Branca, 2009. "Price discrimination with partial information: Does it pay off?," Economics Letters, Elsevier, vol. 105(1), pages 28-31, October.
    3. Kresimir Zigic & Jiri Strelicky & Michael Kunin, 2013. "The Interaction between Private and Public IPR Protection in a Software Market: A Positive and Normative Analysis," CERGE-EI Working Papers wp490, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Vish Krishnan & Karthik Ramachandran, 2011. "Integrated Product Architecture and Pricing for Managing Sequential Innovation," Management Science, INFORMS, vol. 57(11), pages 2040-2053, November.
    5. Clavorà Braulin, Francesco, 2023. "The effects of personal information on competition: Consumer privacy and partial price discrimination," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    6. Wei, Yuansheng & Huang, Pei, 2019. "A model of product compatibility introduction with consumer recognition," International Journal of Research in Marketing, Elsevier, vol. 36(4), pages 613-629.
    7. Vamosiu, Adriana, 2018. "Compatibility and bundling of stand and No stand-alone use complements," International Journal of Production Economics, Elsevier, vol. 201(C), pages 62-74.

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