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Compatibility Effects of SET-UP Costs in the Organization of Service Systems

The paper introduces an analysis of production of a system good. The allocation of ownership rights and the set-up costs of system components determine whether the systems are organized through homogeneous or heterogeneous sets of suppliers in an equilibrium model of system services. In the latter case, problems of incompatibility may arise. Homogeneity and thus compatibility are possible equilibrium results if set-up costs are allocated to one component only. As our main result, we establish that entry deterrence has the social benefit of reducing the risk of incompatibility. The drawback is that market equilibrium may not exist. The theoretical analysis is related to stylized facts of transportation systems that are characterized by a limited substitution of components at different levels.

Autor
Prof. Dr. rer. pol. Manfred J. Holler
Vesna Kanniainen

Artikel
2005

Fachbereich
Volkswirtschaftslehre

Fachrichtung
Volkswirtschaftstheorie

Schlagwörter
Allgemeines Gleichgewicht, Compatibility, General equilibrium, Kompatibilität, Service system, Servicesystem, Standardisierung, Standardization, System goods, SystemgüterTransportsystem, Transportation system

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