1985/06/01 by Jeremy Bulow, John Geanakoplos, Paul Klemperer · 2,605 citations
Business, Management and Accounting · Computer Science · #Business #Corporate Finance and Governance #Cournot competition #Economic Growth and Development #Economics #Industrial organization #Intellectual Property and Patents #Microeconomics #Oligopoly #Strategic complements
paper · doi:10.1086/261312
published in Journal of Political Economy 93(3), 488-511 (University of Chicago Press)
openalex publication_date 1985/06/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
A firm’s actions in one market can change competitors’ strategies in a second market by affecting its own marginal costs in that other mar-ket. Whether the action provides costs or benefits in the second market depends on (a) whether it increases or decreases marginal costs in the second market and (b) whether competitors’ products are strategic substitutes or strategic complements. The latter distinction is determined by whether more “aggressive” play (e.g., lower price or higher quantity) by one firm in a market lowers or raises compet-ing firms’ marginal profitabilities in that market. Many recent results in oligopoly theory can be most easily understood in terms of strategic substitutes and complements.