Mutually related firms and the rationality of producing nothing

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This paper considers the pricing and output decisions of firms which are related by the complementary nature of their products. The paper focuses on the problems which may result from non-co-operative behaviour of such firms. At the extreme, it is shown that non-cooperative complementary firms may ‘rationally’ choose to produce nothing. The paper considers the conditions which lead to this market failure result, and whether encouragement by government for the firms to co-operate or merge is required to make the market operate more efficiently.
Original languageEnglish
Pages (from-to)485-491
Number of pages7
JournalManagerial and Decision Economics
Issue number6
Publication statusPublished - 1992

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