You own and run a florist business that competes in prices with only one other competitor in the town. Wages are the biggest marginal cost of a florist and form a large part of total costs. The town is isolated so consumers cannot easily buy from other florists, and it is small compared to national population. Your floral designs are different from your competitor's, in part because your competitor is part of a chain that sets design and prices centrally so that they are uniform across the country. 

(a) Are you in a game of strategic substitutes or complements?

 (b) Suppose wages rise sharply in your town but not in the rest of the country. What will happen to equilibrium prices? 

(c) Would you prefer your competitor's chain to abandon its uniform pricing policy or not

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a Game of Strategic Substitutes or Complements You are in a game of strategic substitutes Since your ... View the full answer