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Regulating the Anticommons: Insights from Public‐Expenditure Theory

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  • Matt Van Essen
Abstract
This article offers a new interpretation of the traditional Cournot complements problem, or anticommons, by using the theory of public goods to gain a perspective on the problem. Specifically, I examine the pricing strategies and regulation of multiple monopolies that produce products which consumers view as perfect complements. I show that collusion by the firms increases total social welfare and that the collusion problem can be reinterpreted as a problem of provision of public goods from the point of view of the firms. I take this insight further and derive the familiar concepts of the Samuelson marginal condition and the ratio equilibrium for the firms. I compare these outcomes to the first best solution and then apply incentive‐compatible mechanisms to strategically implement the Pareto superior ratio‐equilibrium outcome and the optimal marginal‐cost pricing outcome. Finally, I show how this methodology can be applied to the more familiar Cournot model of oligopoly.

Suggested Citation

  • Matt Van Essen, 2013. "Regulating the Anticommons: Insights from Public‐Expenditure Theory," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 523-539, October.
    • Handle: RePEc:wly:soecon:v:80:y:2013:i:2:p:523-539
    DOI: 10.4284/0038-4038-2012.147
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    References listed on IDEAS

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