Complementarity Without Superadditivity

7 Pages Posted: 14 Nov 2016

See all articles by Steven Berry

Steven Berry

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Philip A. Haile

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Mark A. Israel

Compass Lexecon

Michael L. Katz

University of California, Berkeley - Economic Analysis & Policy Group

Date Written: November 2016

Abstract

The distinction between complements, substitutes, and independent goods is important in many contexts. It is well known that when consumers’ conditional indirect utilities for two goods are superadditive, the goods are gross complements. Generalizing insights in Gans and King (2006) and Gentzkow (2007), we show that superadditivity between one pair of goods can also introduce complementarity between competing pairs of goods. One implication is that lower prices can result from a merger between producers of goods that themselves offer no superadditivity.

Suggested Citation

Berry, Steven T. and Haile, Philip A. and Israel, Mark A. and Katz, Michael Louis, Complementarity Without Superadditivity (November 2016). NBER Working Paper No. w22811. Available at SSRN: https://ssrn.com/abstract=2868909

Steven T. Berry (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
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National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

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Philip A. Haile

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8264
United States
203-432-3568 (Phone)
203-432-6323 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Mark A. Israel

Compass Lexecon ( email )

United States

Michael Louis Katz

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States

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