Innovators who have made significant breakthroughs may be tempted to get a head start in developing the applications of a new discovery before commercializing any new product. We consider how this socially undesirable waiting period and the pattern of development of subsequent innovations are...

In many industries, consumers combine several components to build their own "system." This paper analyzes the incentives to standardize among firms selling a single component to consumers who have already acquired the rest of the system. By selling a component that can work with different...

We investigate the choice of compensation scheme by firms. Our basic model shows that the unique equilibrium choice for profit maximizing duopsonists in a labor market is for one firm to offer a wage rate and for the other to offer a piece rate. this result arises because the firms recognize...

In industries where consumers can assemble their own systems, firms must decide whether to make their components compatible with those of their rivals. We examine a two-stage game in which two fully integrated firms make their compatibility decisions before competing in prices. The symmetric...

Innovators who have made significant breakthroughs may be tempted to get a head start in developing the applications of a new discovery before commercializing any new product. We consider how this socially undesirable waiting period and the pattern of development of subsequent innovations are...

This paper presents a simple model of compatibility and bundling in industries where consumers assemble several necessary components into a system that is close to their ideal. The authors show that, for a wide range of parameters, firms will choose to produce compatible components but will...