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Rivalry between strategic alliances

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Abstract

Rivalry between strategic alliances is investigated in a model where each alliance member maximizes its own profit and some share of its partner's profit. A complementary alliance confers a strategic advantage by allowing the partners to credibly commit to greater output, owing to both within-alliance complementarities and cross-alliance substitutabilities. Although rivalry between different alliances can sometimes lead to a Prisoners' Dilemma for firms, it tends to improve economic welfare. On the other hand, an alliance that arises due purely to the threat of entry may reduce welfare.

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[Zhang, Anming] Sauder School of Business, University of British Columbia, 2053 Main Mall, Vancouver, B.C. Canada V6T 1Z2

[Zhang, Yimin] China Europe International Business School (CEIBS), Shanghai, China; Department of Economics and Finance, City University of Hong Kong, Hong Kong


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Source

International Journal of Industrial Organization

ISSN:0167-7187

Year:2006

Issue:2

Volume:24

Page:287-301

Powered by JCR@2006

ESI Discipline:ECONOMICS & BUSINESS;

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