Oligopoly, Complementarities, and Transformed Potentials

Volker Nocke and Nicolas Schutz

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We adopt a potential games approach to study multiproduct-firm pricing games.We introduce the new concept of transformed potential and characterize the classes of demand systems that give rise to pricing games admitting such a potential. The resulting demand systems may contain nests (of closer substitutes) or baskets (of products that are purchased jointly), or combinations thereof. These demand systems allow for flexible substitution patterns, and can feature product complementarities arising from joint purchases and substitution away from the outside option. Combining the potential games approach with a competition-in-utility approach, we derive powerful results on existence of pure-strategy Nash equilibria.

Keywords: Multiproduct firms; potential game; oligopoly pricing; complementary goods; joint purchases; nests (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Pages: 56
Date: 2025-02, Revised 2025-07
New Economics Papers: this item is included in nep-com and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2025_644_v2

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