Strategic Substitutes and Strategic Complements With Interdependent Demands

Strategic Substitutes and Strategic Complements With Interdependent Demands Strategic substitutes and complements have become standard tools of analysis in industrial organization. Bulow et al. (1985) original model which introduced these concepts focused on multimarket oligopoly. Building upon that model, this paper shows that there becomes not one but two strategic interaction terms if the demands between markets is interdependent and the firms compete in prices. This new model is applied to the telecommunications industry, where the local exchange carriers face competition from competitive access providers. The theoretical model shows the critical variables in the local exchange carriers' strategic pricing decision. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Strategic Substitutes and Strategic Complements With Interdependent Demands

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1997 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1007732209294
Publisher site
See Article on Publisher Site

Abstract

Strategic substitutes and complements have become standard tools of analysis in industrial organization. Bulow et al. (1985) original model which introduced these concepts focused on multimarket oligopoly. Building upon that model, this paper shows that there becomes not one but two strategic interaction terms if the demands between markets is interdependent and the firms compete in prices. This new model is applied to the telecommunications industry, where the local exchange carriers face competition from competitive access providers. The theoretical model shows the critical variables in the local exchange carriers' strategic pricing decision.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Sep 29, 2004

References

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