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Complementarity without superadditivity

Author

Listed:
  • Berry, Steven
  • Haile, Philip
  • Israel, Mark
  • Katz, Michael

Abstract

The distinction between complements, substitutes, and independent goods is important in many contexts. It is well known that when consumers’ conditional indirect utilities for two goods are superadditive, the goods are gross complements. Generalizing insights in Gans and King (2006) and Gentzkow (2007), we show that superadditivity between one pair of goods can also introduce complementarity between competing pairs of goods. One implication is that lower prices can result from a merger between producers of goods that themselves offer no superadditivity.

Suggested Citation

  • Berry, Steven & Haile, Philip & Israel, Mark & Katz, Michael, 2017. "Complementarity without superadditivity," Economics Letters, Elsevier, vol. 151(C), pages 28-30.
    • Handle: RePEc:eee:ecolet:v:151:y:2017:i:c:p:28-30
    DOI: 10.1016/j.econlet.2016.11.020
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    References listed on IDEAS

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    1. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
    2. Joshua S. Gans & Stephen P. King, 2006. "Paying For Loyalty: Product Bundling In Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 43-62, March.
    3. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
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    Cited by:

    1. Cohen, Jed & Azarova, Valeriya & Kollmann, Andrea & Reichl, Johannes, 2019. "Q-complementarity in household adoption of photovoltaics and electricity-intensive goods: The case of electric vehicles," Energy Economics, Elsevier, vol. 83(C), pages 567-577.

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    More about this item

    Keywords

    Complements; Substitutes; Discrete choice; Mergers;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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