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Oligopoly, Complementarities, and Transformed Potentials

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  • Volker Nocke

  • Nicolas Schutz

Abstract

We adopt a potential games approach to study multiproduct-firm pricing games.We introduce the new concept of transformed potential and characterize the classes of demand systems that give rise to pricing games admitting such a potential. The resulting demand systems may contain nests (of closer substitutes) or baskets (of products that are purchased jointly), or combinations thereof. These demand systems allow for flexible substitution patterns, and can feature product complementarities arising from joint purchases and substitution away from the outside option. Combining the potential games approach with a competition-in-utility approach, we derive powerful results on existence of pure-strategy Nash equilibria.

Suggested Citation

  • Volker Nocke & Nicolas Schutz, 2025. "Oligopoly, Complementarities, and Transformed Potentials," CRC TR 224 Discussion Paper Series crctr224_2025_644_v2, University of Bonn and University of Mannheim, Germany, revised Jul 2025.
    • Handle: RePEc:bon:boncrc:crctr224_2025_644_v2
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp644
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    JEL classification:

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

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