When companies race to make products that work together, they usually end up releasing stuff that’s intentionally half-baked.
March 25, 2026
Original Paper
Selling Synergies
SSRN · 6462798
The Takeaway
Standard economic theory suggests that complementary products align incentives to create value. This paper reveals a 'preemption race' where the first seller strategically underinvests and overcharges to extract a 'synergy premium,' ultimately eroding the surplus and making society worse off despite the technological gain.
From the abstract
This paper introduces a continuous-time game in which independent sellers develop complementary products. Each seller decides when to cease product development to enter the market. In equilibrium, the leader (the first to the market) strategically underinvests and sets an exclusionary high price extracting an endogenous synergy premium. The strategic advantage triggers a preemption race resulting in underdeveloped products. This dynamic distortion stands in contrast to economic intuition suggest