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In economics, a complementary good is a good whose appeal increases with the popularity of its complement. [ further explanation needed ] Technically, it displays a negative cross elasticity of demand and that demand for it increases when the price of another good decreases. [ 1 ]
In economics and game theory, the decisions of two or more players are called strategic complements if they mutually reinforce one another, and they are called strategic substitutes if they mutually offset one another. These terms were originally coined by Bulow, Geanakoplos, and Klemperer (1985).
Only if the two products satisfy the three conditions, will they be classified as close substitutes according to economic theory. The opposite of a substitute good is a complementary good, these are goods that are dependent on another. An example of complementary goods are cereal and milk. An example of substitute goods are tea and coffee.
When an increase in output by one firm raises the marginal revenues of the other firms, production decisions are strategic complements. When an increase in output by one firm lowers the marginal revenues of the other firms, production decisions are strategic substitutes. A supermodular utility function is often related to complementary goods ...
I.e., the definition includes both substitute goods and independent goods, and only rules out complementary goods. See Gross substitutes (indivisible items).
Complementary assets are assets that when owned together increase the value of the combined assets. It is defined as “the total economic value added by combining certain complementary factors in a production system, exceeding the value that would be generated by applying these production factors in isolation.” [1] Thus two assets are said to be complements when investment in one asset ...
Technically, anything over 20 years old can be coined “vintage.”But when you truly think of items worth this title, your brain doesn’t go to Beanie Babies.
Constant elasticity of substitution (CES) is a common specification of many production functions and utility functions in neoclassical economics. CES holds that the ability to substitute one input factor with another (for example labour with capital) to maintain the same level of production stays constant over different production levels.