Complementary Condoms

Economists talk loosely about substitutes and complements as if each pair of goods can always be characterized as one or the other.

That’s incorrect: their substitutability can depend on the situation, particularly the time and the individual’s circumstances, even for the same person. An acquaintance of mine reported the perhaps-apocryphal story that a major discount store is offering any customer who buys diapers in three different sizes a free package of condoms.

The managers thus assume that for such people, diapers and condoms are complements. Obviously that could not have been true when the event that created the eventual demand curve for diapers occurred!

I wonder, what are other examples of goods that can switch between being complements and substitutes depending on circumstances?


Gary

"Obviously that could not have been true when the event that created the eventual demand curve for diapers occurred!"

As anyone who's read Freakonomics knows, having a child is not necessarily evidence that someone intended to have a child...

Carrie

What a fun thought experiment!

Something as simple as a colored pens switch between complements and substitutes. When I draw a graph I use different colors to differentiate between items, so my blue pen is a complement to my black one. But when I write up my grocery list at home my blue pen is a substitute for a black one.

a student of economics

"The managers thus assume that for such people, diapers and condoms are complements."

Your premise is not so obvious to me. It seems quite common for retailers to offer trial samples of products that are substitutes for what the customer is currently buying (e.g. an alternative brand of diapers for diaper buyers, Cherry Coke for regular Coke buyers, etc).

Yee Hung

I think that makes sense: you are more likely to want to use condoms after having a child, because of family planning (and
not because you now know fully the painful repercussions of being a dad).

Either you don't want more children, or you (or actually, your wife) want to take a break before having another.

Raj Pandravada

"I wonder, what are other examples of goods that can switch between being complements and substitutes depending on circumstances?"

You didn't give an example.

I am struggling to think of any reasons diapers and condoms form either a substitute- or complementary pair.

1. It is not as if one can use a condom instead of a diaper. Or vice-versa.
2. One also cannot use a condom and a diaper together. I mean, they could be used by the same person (say a parent) at the same time, but they definitely aren't used in a complementary fashion.

What the managers in your 'example' are doing is passing judgment, in a way - that anyone who needs to buy three different sized diapers clearly needs to exercise some level of birth control...

Examples, BTW, for pairs that could be substitutes as well as complements:

Coffee and cigarettes
Chewing gum and cigarettes

Smokers usually smoke and drink coffee together. A smoker could also drink coffee as a substitute for cigarettes in places where it is an acceptable stimulant, like in an office.

Similarly, smokers chew gum ( for the obvious breath freshening). But smokers trying to quit might also chew gum to have something else to do...

Read more...

Chris

I don't believe like you that "The managers thus assume that for such people, diapers and condoms are complements. "

This was a """smart""" publicity stunt - and that is all :)

CandyKay

I think it's a rather rude suggestion that someone buying diapers in three sizes already has too many children.

Not that I disagree - three children per family is more than enough in this overstuffed world - but I don't necessarily want to hear that information from my friendly neighborhood discount store.

Drew

Sport Utility Vehicles and Bicycles could go from being Complementary Goods to Substitute goods, depending on circumstances.

In a time of economic prosperity and low energy prices, consumers may purchase both mountain bikes and SUV's: The SUV is suitable for transporting the bikes and passengers into rugged areas, where the mountain bikes are used recreationally. The two goods complement each other - the SUV makes owning the mountain bike more useful, and vice versa.

However in time of economic stress, and high energy prices, consumers may dispose of their gas-guzzling SUV, and instead switch to using the bicycle as cheap, energy-efficient transportation. In such a situation the mountain bike substitutes for the SUV in providing basic transportation.

NM

"Obviously that could not have been true when the event that created the eventual demand curve for diapers occurred!"

Wow - what an incredibly dopey statement. What makes you think a parent (male or female) with children has no need for condoms? Are you under the impression that once a person procreates, s/he stops having sex?

You need to get out more.

John Squire

Diet pills and junk food - compliments in moderation, substitutes pre- or post- excess.

Paul N

Rhubarb and horse manure.

Will

Television and Computers

Complementary because both can give you information, and one can give you more information than another depending on the situation. (live information vs. evening news)

Substitutes because it's difficult to watch 2 movies simultaneously.

randy

Might be more interesting to look at changes in these complements and (for a 30-year retail guy like me) the "adjacency" like beer and diapers, that are set up in the store to take advantage in normal times. In a recession, they change. Beer and wine might not be a match for flowers on a date, or chips for a party, but a numbing agent best put near other basic comforts, like ice cream. i would!

Noah

Different brands of cola, different forms of snack foods, etc. Anything consumed by one person is a substitute for something else, when purchased for a group (like for a party) they are complements.

Really most products where a consumer consumes the item or has multiple instances fall into this category. For example, different ties at a store are substitutes, but a person buying ties is often buying multiple of them, making them complimentary. Similarly, a person on a budget may decide between a new tie and a new shirt to make their outfit look better, but in many other cases, a person will want a new instance of each.

mkagan

$'s and gold.

When investors are looking for safety, they put money in both (viz. last fall).

When the dollar gets debased, people move into gold (viz. next year??)

Tooth

Tea and sugar.
No one in my house puts any sugar in their coffee or tea.

Ties and shirts.
My GF buys ties but not shirts ;)

Matt

Definitely not complimentary. Kids take up alot of energy and attention, not leaving much for some things....

Mukund Korde

laptops and TVs

Andrew

I once ran an errand for my mom and left her waiting in the car while I ran into the drugstore to buy her something. It took longer than expected, and when I came out, I said, "Sorry it took so long. I got caught in line behind the guy who had a three-month-old baby in his arms and was trying to get a refund on a box of condoms because they were obviously defective." I was only kidding, but my mom laughed pretty hard.

Nitin Goyal

Generally speaking products can surely move from being complements to being substitutes. Cars can be complements of public transport while at the same time they can be substitutes. Google Search is a complement to Windows while sometimes it really substitutes the functions of Windows (like Desktop Search). Girlfriend and Wife can be another example?

However business strategy is not so simple.
The idea is to commoditize complements - as much as you commoditize them, the more is the share of the pie you can grab. However for substitutes you need to erect switching costs or enhance value chain.

http://nitnblogs.blogspot.com/2006/01/economics-101-revisited-complements.html