An underlying assumption behind most studies on competition and performance is that the larger the number of existing rivals and new entrants in an industry, the higher the competition. These papers, however, do not consider strategic interaction among industry rivals. When there are numerous firms in an industry (as with perfect competition or monopolistic competition), there is no strategic interaction among firms. Yet, oligopoly is a common market structure (e.g., Coca-Cola and PepsiCo, Apple and Samsung, Nike and Adidas, Boeing and Airbus, Verizon and AT&T) and unique aspects of oligopolistic competition are mutual interdependence and repeated interaction. Game theory plays a central role in modeling the interactions between economic agents. According to the Value Net framework of Branderburger and Nalebuff (1996), firms interact vertically with customers and suppliers, and horizontally with substitutors and complementors. Along both vertical and horizontal dimensions, there is a mixture of cooperation and competition. Brandenburger and Nalebuff‘s concept of co-opetition is a recognition of the competitive and cooperative duality of business relationships. This paper examines the relation between the extent and type of strategic interaction among industry firms and firm performance. We use the term ―strategic interaction‖ to denote the entire array of firm behaviors in which there is some form of cooperation or coordination among industry players. Strategic interactions can range from tacit collusions (cooperative interactions) to non-cooperative interactions.1 We capture the extent and type of strategic interaction in an industry by computing the competitive strategy measure (CSM) developed by Sundaram et al. (1996), Lyandres (2006), and Chod and Lyandres (2011). CSM is a measure of the slope of the firm‘s reaction (best-response) function. To examine how different types of strategic interactions affect the relation between the degree of strategic interaction and firm performance, we characterize markets by strategic complements or strategic substitutes following Fudenberg and Tirole (1984) and Bulow et al. (1985).2 If the firm‘s reaction function is upward sloping, the firm is said to compete in strategic complements. When the reaction function is downward sloping, the firm is said to compete in strategic substitutes. Intuitively, the idea of strategic complements is that competitors match a firm‘s strategic move in the same direction. Examples of this strategy include lowering price in price competition, producing greater quantity in quantity competition, and increasing levels of advertising in response to greater advertising by rivals. With strategic substitutes, competitors move in the opposite direction (e.g., when one firm increases its output, competitors will lower their outputs in response). Whereas the sign of mean industry CSM indicates the type of strategic interaction among firms in the industry (strategic complements or strategic substitutes), its magnitude measures the intensity of this interaction.