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Complement good

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(Redirected from Complementary good)

A complement good (or complementary good) is a good that should be consumed with another good. In economics, it is a good whose cross elasticity of demand is negative. This means that if more of Good A were bought, more of Good B would also be bought if they were complements. An example of complement goods are hamburgers and hamburger buns. If the price of hamburgers falls, more hamburger buns would be sold because the two are usually used together.

A perfect complement is a good that has to be consumed with another good. Many goods in the real world exhibit characteristics close to perfect complementariness. An example would be a pair of shoes.

The degree of complementariness does not have to be mutual. It can be measured by cross price elasticity of demand. In the case of video games, a specific video game has to be consumed with a video game console, the base good. While a video game console does not have to be consumed with that game.

The opposite of a complement good is a substitute good.

In marketing, complementary goods give additional market power to the company. It allows vendor lock-in as it increases the switching cost. A few types of pricing strategies exist for complementary good and its base good.

  • Pricing the base good at a relatively low price to the complementary good - this approach allows easy entry by consumers (e.g. consumer printer vs ink jet cartridge)
  • Pricing the base good at a relatively high price to the complementary good - this approach creates a barrier to entry and exit (e.g. golf club membership vs green fees)

See also

nl:Complementair goed

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