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.
Review of Industrial Organization – Springer Journals
Published: Sep 29, 2004
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