A core economic principle is the Complementary Good . In short, when two or more things are used together, they are complementary. When the price of an item goes up, the usage of all of its complementary goods goes down. Similarly, if the price of an item goes down, the usage of all its complementary goods goes up. An example is the computer printer. Printers and ink are complementary goods. Proprietary ink products are extremely valuable—at one point ink delivered 60% of HP’s profits —so HP, understanding the principle of complementary goods, practically gives away printers because they make money on the ink. This is the classic razors and blades business model.
Businesses want to lower the cost of their products, while maintaining or improving their margins. …[Read more]