INTERGENERATIONAL PRODUCT COMPATIBILITY AND PRICE COMPETITION
Organizing the New Industrial Economy
ISBN: 978-0-76231-081-4, eISBN: 978-1-84950-254-2
Publication date: 17 December 2003
Abstract
This paper considers firms’ incentive to preserve compatibility between product generations in a duopoly setting. A firm may or may not maintain backward compatibility depending on its first period market share. Firms’ compatibility choices consequently will affect their pricing behaviors. Specifically, it is shown that under certain conditions both firms will preserve compatibility and act as local monopolist in the second period. Hence, backward compatibility becomes a tool for firms to relax second period price competition.
Citation
Chen, D. (2003), "INTERGENERATIONAL PRODUCT COMPATIBILITY AND PRICE COMPETITION", Baye, M.R. (Ed.) Organizing the New Industrial Economy (Advances in Applied Microeconomics, Vol. 12), Emerald Group Publishing Limited, Leeds, pp. 237-266. https://doi.org/10.1016/S0278-0984(03)12009-3
Publisher
:Emerald Group Publishing Limited
Copyright © 2003, Emerald Group Publishing Limited