A firm selling complementary products may cut the price of one to encourage sales of the other.  This effect can be so strong that one of the products is sold as a loss leader:

A recent analysis from IHS iSuppli determined that Amazon’s $79 Kindle e-reader, which is the online retailer’s cheapest Kindle thus far, costs $84.25 to make…..Even if Amazon pays more to build the $79 Kindle than it sells it for, the company has several other ways to bring in money from the device. This Kindle model includes ads that show up as screensavers and at the bottom of the device’s home screen. And Amazon sees all the devices in the Kindle family — and the free Kindle apps it offers for mobile devices and computers — as a way to spur more sales of its digital e-books, music, games and apps.

 

Advertisement