One-Way Essential Complements

This paper explains the behavior of firms in markets with one-way essential complements. These are markets in which one good is essential to the use of another but not vice versa, as arises with an operating system and application software. Our interest is in the division of surplus between the two markets and the related incentive for firms to create complements to an essential good. Formally, we study a model where consumers value two goods (A and B) and can consume A alone, but can only enjoy B if they also purchase A. We consider the value of such strategies as adding a surcharge to the price of B, degrading quality of rival B products, or acting as a Stackelberg leader.