Regulating the Anticommons: Insights from Public-Expenditure Theory

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.