TY - JOUR
T1 - Systems competition, vertical merger, and foreclosure
AU - Church, Jeffrey
AU - Gandal, Neil
PY - 2000
Y1 - 2000
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=0034383853&partnerID=8YFLogxK
U2 - 10.1162/105864000567783
DO - 10.1162/105864000567783
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AN - SCOPUS:0034383853
SN - 1058-6407
VL - 9
SP - 25
EP - 51
JO - Journal of Economics and Management Strategy
JF - Journal of Economics and Management Strategy
IS - 1
ER -