Question

What is the difference between a soft commitment and no commitment?

Explain why prices are usually strategic complements and capacities are usually strategic substitutes.

Answer 1

Difference between a soft commitment and no commitment : In soft commitment people work as a team and care about the result. It can be more time consuming and less performance. It has no strict rules to complete a commitment and no commitment is lack of commitment or failure to commitment or refusal to commitment.

Prices are usually strategic complements: When a firm's action causes the rival firm to take same action then the actions are strategic complements. If a firm reduces its prices then the rival firm also reduces and vice-versa to compete with another firm.

Capacities are usually strategic substitutes: When a firm's action offset another firm's action then the action is called strategic substitutes. Capacity of one firm offset another firm's capacity.