Separating complements: the effects of competition and quality leadership

The literature on the tragedy of the anticommons typically suggests that producers of complementary goods should integrate themselves. Recent decisions by the antitrust authorities seem however to indicate that there exists a tradeoff between the “tragedy” and the lack of competition characterizing an integrated market structure. In this paper we analyze such tradeoff in oligopolistic complementary markets when products are vertically differentiated. We show that quality leadership plays a crucial role. When there is a quality leader, forcing divestitures or prohibiting mergers, thus increasing competition, lowers prices and enhances consumer surplus. However, when quality leadership is shared, “disintegrating” firms may lead to higher prices. In this case, concerns about the tragedy of the anticommons are well posed in antitrust decisions.