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The Effects of Integration on R&D Incentives in Systems Markets

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Abstract

We consider a systems market where two complementary components must be used in combination to provide valuable services. The market for the first component is monopolized whereas the market for the second is potentially served by multiple firms. We show that integration of the monopolist into the competitive complementary market may distort incentives for R&D, reducing total economic welfare.

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Authors and Affiliations

  1. Department of Economics, Michigan State University, 101 Marshall Hall, East Lansing, MI, 48824, USA

    Jay Pil Choi

  2. Korea Information Society Development Institute, 1-1 Juam, Gwachun, Gyunggi, 427-710, Republic of Korea

    Gwanghoon Lee

  3. Payment System Studies, Research Dept., Federal Reserve Bank of New York, 33 Liberty Street, New York, NY, 10045-0001, USA

    Christodoulos Stefanadis

Authors
  1. Jay Pil Choi
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  2. Gwanghoon Lee
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  3. Christodoulos Stefanadis
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Choi, J.P., Lee, G. & Stefanadis, C. The Effects of Integration on R&D Incentives in Systems Markets. NETNOMICS: Economic Research and Electronic Networking 5, 21–32 (2003). https://doi.org/10.1023/A:1024969416825

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  • DOI: https://doi.org/10.1023/A:1024969416825

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