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Imperfect competition with complements and substitutes

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  • Quint, Daniel

Abstract

I study price competition in settings where end products are combinations of components supplied by different monopolists, nesting standard models of perfect complements and imperfect substitutes. I show sufficient conditions for a discrete-choice demand system to yield demand for each product which is log-concave in price, and has log-increasing differences in own and another product's price, leading to strong comparative statics results. Many results familiar from simple models, like the price effects of mergers or changes in marginal costs, extend naturally to this more complex setting.

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  • Quint, Daniel, 2014. "Imperfect competition with complements and substitutes," Journal of Economic Theory, Elsevier, vol. 152(C), pages 266-290.
    • Handle: RePEc:eee:jetheo:v:152:y:2014:i:c:p:266-290
    DOI: 10.1016/j.jet.2014.05.004
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    Cited by:

    1. Michal Fabinger & E. Glen Weyl, 2018. "Functional Forms for Tractable Economic Models and the Cost Structure of International Trade," CIRJE F-Series CIRJE-F-1092, CIRJE, Faculty of Economics, University of Tokyo.
    2. Michal Fabinger & E. Glen Weyl, 2016. "The Average-Marginal Relationship and Tractable Equilibrium Forms," CIRJE F-Series CIRJE-F-1028, CIRJE, Faculty of Economics, University of Tokyo.
    3. Andrew Rhodes & Jidong Zhou, 2022. "Personalized Pricing and Competition," Cowles Foundation Discussion Papers 2329, Cowles Foundation for Research in Economics, Yale University.
    4. E. Weyl & Michal Fabinger, 2015. "A Tractable Approach to Pass-Through Patterns," 2015 Meeting Papers 747, Society for Economic Dynamics.
    5. Alexandrov, Alexei & Bedre-Defolie, Özlem, 2017. "LeChatelier–Samuelson principle in games and pass-through of shocks," Journal of Economic Theory, Elsevier, vol. 168(C), pages 44-54.
    6. Han, Tien-Der & Mukherjee, Arijit, 2023. "Mergers of complements, endogenous product differentiation and welfare," Mathematical Social Sciences, Elsevier, vol. 126(C), pages 30-41.
    7. Tan, Guofu & Zhou, Junjie, 2024. "Consumer heterogeneity and inefficiency in oligopoly markets," Journal of Economic Theory, Elsevier, vol. 220(C).
    8. Zhou, Jidong, 2021. "Mixed bundling in oligopoly markets," Journal of Economic Theory, Elsevier, vol. 194(C).
    9. Kadner-Graziano, Alessandro S., 2023. "Mergers of Complements: On the Absence of Consumer Benefits," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    10. Thanassoulis, John, 2018. "The I.O. of ethics and cheating when consumers do not have rational expectations," CEPR Discussion Papers 13172, C.E.P.R. Discussion Papers.
    11. Alberto Bucci & Vladimir Matveenko, 2017. "Horizontal differentiation and economic growth under non-CES aggregate production function," Journal of Economics, Springer, vol. 120(1), pages 1-29, January.
    12. Michal Fabinger & E. Glen Weyl, 2016. "Functional Forms for Tractable Economic Models and the Cost Structure of International Trade," Papers 1611.02270, arXiv.org, revised Aug 2018.
    13. Adachi, Takanori, 2023. "A sufficient statistics approach for welfare analysis of oligopolistic third‐degree price discrimination," International Journal of Industrial Organization, Elsevier, vol. 86(C).
    14. Shuai, Jie & Yang, Huanxing & Zhang, Lan, 2022. "Dominant firm and competitive bundling in oligopoly markets," Games and Economic Behavior, Elsevier, vol. 132(C), pages 421-447.
    15. Jidong Zhou, 2017. "Competitive Bundling," Econometrica, Econometric Society, vol. 85, pages 145-172, January.
    16. Gabaix, Xavier & Laibson, David & Li, Deyuan & Li, Hongyi & Resnick, Sidney & de Vries, Casper G., 2016. "The impact of competition on prices with numerous firms," Journal of Economic Theory, Elsevier, vol. 165(C), pages 1-24.
    17. Makoto Hanazono & Noritaka Kudoh, 2024. "Prominence And Market Power: Asymmetric Oligopoly With Sequential Consumer Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(3), pages 1249-1281, August.

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    More about this item

    Keywords

    Substitutes; Complements; Mergers; Imperfect competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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