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Testing for complementarities among countable strategies

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  • Eugenio Miravete

Abstract

I study whether the pricing strategies of competing duopolists in the early US cellular telephone industry can be considered strategic complements or substitutes. In order to do so, I present a multivariate count data regression model that is suitable to test for the existence of strategic complementarities when firms make use of countable strategies. The estimator, which accommodates the underdispersion that characterizes the data, is shown to have better small-sample properties than common estimators based on the Gaussian copula. It also allows for correlations of any sign among counts independently of the dispersion parameters. Results show that in addition to screening consumers, competing firms imitated each other in the number of tariff options offered to their customers. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Eugenio Miravete, 2014. "Testing for complementarities among countable strategies," Empirical Economics, Springer, vol. 46(4), pages 1521-1544, June.
    • Handle: RePEc:spr:empeco:v:46:y:2014:i:4:p:1521-1544
    DOI: 10.1007/s00181-013-0729-y
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