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?
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“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…
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.
“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).
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.
“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…
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
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.
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.