This paper shows that the private incentive for mix-and-match compatibility in system markets diverges from the social planner's incentive if competing suppliers are asymmetric in production cost or product quality. There can be too much or too little compatibility when the market is served by...

This paper investigates how call and network externalities affect a monopolist’s optimal nonlinear pricing of a two-way telecommunication service. The existence of call externalities results in all types of subscribers (even the highest type) making suboptimal quantities of calls in the...

This note examines firms’ strategic choices between leasing and selling in a market for horizontally differentiated durable goods. Firms’ decisions on marketing strategies may lead to socially inefficient outcomes. Moreover, a prisoners’ dilemma-type situation may arise.