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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.

Suggested Citation

  • 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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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. Zhou, Jidong, 2015. "Competitive Bundling," MPRA Paper 68358, University Library of Munich, Germany.
    4. 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.

    More about this item

    Keywords

    Substitutes; Complements; Mergers; Imperfect competition;

    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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