Complements & Substitutes is complements raise each other's value; substitutes lower it. It sits in the Cognition dimension (COG) of the Human Behavior Taxonomy™ as element HBT-COG-0168, within the Economics family. The core principle: complements raise each other's value; substitutes lower it. In incentive terms, it matters because it changes the payoff people perceive before they choose — which means it can be designed for, or exploited.
Scientific Definition
Complements raise each other's value; substitutes lower it.
Plain-English Definition
Complements raise each other's value; substitutes lower it.
Feynman Explanation
Find your complement. Avoid being someone's substitute.
Core Principle
Complements raise each other's value; substitutes lower it.
Mechanisms
Pending editorial review.
Complements raise each other's value; substitutes lower it.
Pending editorial review.
Pending editorial review.
Pending editorial review.
Pending editorial review.
Strategic positioning is largely about which side of this you're on.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
Find your complement. Avoid being someone's substitute.
Examples
- Cloud + AI are complements; horse + car were substitutes.
- Strategic positioning is largely about which side of this you're on.
Pending editorial review.
Original analysis from The Incentives Lab — how this element behaves inside real payoff structures.
Why this element matters to incentive design
Executives usually notice this element only after it has cost something. By then it looks like a one-off. It is not. The mechanism underneath it is straightforward: complements raise each other's value; substitutes lower it. You can recognize it in the field by its signature: find your complement. Avoid being someone's substitute. Every element in the Cognition dimension changes the perceived payoff of an action before the action happens, which is exactly where incentive design has leverage.
How it gets exploited
Left undesigned, strategic positioning is largely about which side of this you're on. It is amplified whenever strategic positioning is largely about which side of this you're on. Inside organizations that shows up as strategic positioning is largely about which side of this you're on. The pattern is the same one Goodhart's Law describes: the measurable proxy attracts the effort, and the purpose behind it quietly loses funding.
How the Lab designs around it
The redesign move is to map every key partner and competitor as complement or substitute. Treat it as infrastructure. Once you can see it in your own system, most of the argument about culture resolves itself.
Famous Experiments
Pending editorial review.
Design Principles
- Map every key partner and competitor as complement or substitute.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Map every key partner and competitor as complement or substitute.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
Exploiting price differences between markets for risk-free profit.
The study of how real humans actually decide — bounded, social, emotional, and inconsistent.
With clear property rights and low transaction costs, parties negotiate to efficient outcomes.
Specialize in what you give up the least to do.
Fixed costs don't scale with output; variable costs do.
Innovation destroys old industries and creates new ones.
Each additional unit produces less marginal benefit.
A long-run planner self in conflict with a short-run impulsive self.
Owning something raises its valuation — sellers want more to give it up than buyers will pay to acquire.
Bad money drives out good when both are legally equivalent.
The mythical fully rational, self-interested, utility-maximizing agent neoclassical models assume.
One party has more or better information than another.
Where Complements & Substitutes is cited in the corpus
Essays, field guides, and diagnostics from The Incentives Lab that apply this element.
- EssayGoodhart's Law in the Real World
How measurable proxies capture judgment.
- EssayThe Perverse Incentives Hiding in Your KPIs
Cognitive shortcuts turned into scorecards.
- EssayAI Agents Inherit Your Incentives
How this element propagates into automated systems.
- CourseIncentives 101
The free ten-part primer on reading a payoff structure.
- ReferenceThe incentive glossary
Definitions for every mental model, bias, and fallacy in the corpus.
- ReferenceThe Periodic Table of Human Behavior
The full 1,267-element map this page belongs to.
Questions about Complements & Substitutes
- What is Complements & Substitutes?
- Complements & Substitutes is complements raise each other's value; substitutes lower it. It sits in the Cognition dimension (COG) of the Human Behavior Taxonomy™ as element HBT-COG-0168, within the Economics family. The core principle: complements raise each other's value; substitutes lower it. In incentive terms, it matters because it changes the payoff people perceive before they choose — which means it can be designed for, or exploited.
- What is an example of Complements & Substitutes?
- Strategic positioning is largely about which side of this you're on. The Incentives Lab catalogs everyday, organizational, and historical instances of this element on its Human Behavior Taxonomy™ page (HBT-COG-0168).
- How is Complements & Substitutes exploited?
- Strategic positioning is largely about which side of this you're on.
- How do you design around Complements & Substitutes?
- Map every key partner and competitor as complement or substitute.
- Which behavioral dimension does Complements & Substitutes belong to?
- Complements & Substitutes is classified in the Cognition dimension (COG) of the Human Behavior Taxonomy™, family "Economics", class "Mental Model". Its permanent identifier is HBT-COG-0168 and its evidence grade is B.