So, hello back. In the last couple of videos, we've looked at strategies that firms can undertake when their products are complements. And we'll now in this video develop this idea further, and we'll look at how complementarity can help achieve cooperation among firms that might otherwise compete. And as we saw in the previous video sometimes competitors can also be complementors. We used the example of two cloth stores in a shopping mall in the previous video. But we're now going to take this a step further and talk about companies that produce multiple products. And these multiple products, some of those will be direct substitutes and some of those will be complements. And we'll see two examples of that and see how that may pan out in competition. So, in certain situations firms may simply be competitors in one part of the market. So, they might also be complementors in the other part of the market. And in such a situation they may not compete as harshly as if they were just competitors. So in other words, the fact that you are producing a product that may be complementary to your rival's product may soften competition and make you behave more cooperatively. So let's have a look at two examples. Think of music players and music content. We have two leading firms here, Sony and Apple and both of those are clear competitors because they both sell portable music players. Right? So you've got the Sony MP3 players, you've got Apple's iPod, iPhone, and so on. So clearly they are substitutes when it comes to music listening devices. But at the same time they were also complementers in a very specific way. Namely that the subsidiary by Sony dealing with content, with music, Sony music, provides music content for use in the Apple iPod, or the iPhone. So this means that the two produce complements as well as producing substitute products. This means two things. It means on the one hand that Sony producing more music is good for Apple, right. So the more content there is the better it becomes for Apple to sell the iPod or the iPhone, but at the same time, Apple's iTunes store is also an important sales platform for Sony's music content. So that means that the iTunes store is an important complement for the music content by Sony. So here, complementary and conflicting interests are present in the same set of firms. Another example is the example of mobile phone calls. So we'll just take two, these are the two largest providers in Germany, Vodafone and T-Mobile. And they are competitors because they both sell mobile phone contracts. And it's pretty clear that you're going to opt for either one of those two, it is unlikely that you're going to be using both, or that it's more useful for you if you buy both. So, they're clear competitors, right? So you either go for one or the other. But on the other hand, they're also complementors. And they're complementors in a very specific way because their networks are interlinked. In other words, if you have a T-Mobile contract, you can call Vodafone customers, and if you have a Vodafone contract, you can call T-Mobile customers. And is that a good thing? Is that a reason to think of complementarities? Well, of course. Because you join Vodafone, you join a particular network, because you know that you can call your own members of your own network, but you can also call T-Mobile customers and vice versa of course. So this means that parts of the revenues of Vodafone and T-Mobile will come from these cross network calls. In other words, the better the network for Vodafone customers is, the more useful it is for T-Mobile and vice versa. So again we have that interesting and strange situation where two firms compete on the one hand but they also have complementary interests at the same time. So to sum up, we can see or we have seen that complementarity can help achieve cooperation. And to be a bit more specific, if two companies produce similar or even the same products in one market and complementary products in another market, they won't compete that harshly. And we'll have a brief quiz on this, so do try to go through it and I'll see you after this with our last video lecture for today. So, see you in a second.
