ABSTRACT
Complementary goods are a group of goods consumed together to meet a specific need, such as sugar and coffee. Substitute goods, due to changing circumstances, may replace each other in use or consumption, such as tea and coffee. These goods increase consumers’ choices and competition between companies. Consequently, a competitive atmosphere may lead to high marketing and promotional costs to earn a better market share, which, in turn, cuts operating profits. The demand for complementary and substitute goods has always been a dilemma that companies face because the demand for any of the mentioned goods affects the demand of other commodity groups and influences the company’s profitability. This chapter studies the interaction between demand for complementary and substitute goods and proposes some commonly used substitute or complementary sensitive demand functions. Moreover, some optimization models are addressed to clarify the usage of these functions and show their effect on companies’ total profit. Finally, the chapter ends with a comprehensive research trend and some directions for future studies.
