This paper studies the choice of compatibility in a model of two types of complementary products. It is assumed that the industry for the first type of the complementary components is a duopoly where firms realize positive profits, while the industry for the second type of complementary components is monopolistically competitive. Two regimes are compared. In the regime of compatibility, all components are readily combinable. In the regime of incompatibility, a type "B" producer has to provide two different versions of his product, each compatible with a specific type "A" component. It is shown that, at the long run free entry equilibrium, the number of active "B"-type producers is smaller in the regime of incompatibility. When there is no significant increase in industry demand as a result of an increase in the number of varieties of type "B", profits for "A"-type firms are higher in the regime of incompatibility, and these firms will prefer this regime. Conversely, when the addition of a variety results in a significant increase in industry demand, an "A"-type firm has higher profits in the regime of compatibility.

Key words: Compatibility, Standardization, Components, Variety.

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