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A Strategic Motivation for Commodity Bundling

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Author Info
Carbajo, Jose
de Meza, David
Seidmann, Daniel J

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Abstract

The analytical literature on commodity bundling explains the practice of selling two or more differentiated products in a single package as a surrogate for direct price discrimination. In contrast, this paper shows that imperfect competition creates a strategic incentive to bundle. The profitability of bundling, whether it adversely affects rival producers, and whether it yields an overall efficiency gain depends inter alia on the nature of product market competition. The role of complementarity in explaining why firms bundle is also explored. Copyright 1990 by Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 38 (1990)
Issue (Month): 3 (March)
Pages: 283-98
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Handle: RePEc:bla:jindec:v:38:y:1990:i:3:p:283-98

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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  1. Jay Pil Choi, 2003. "Antitrust Analysis of Mergers with Bundling in Complementary Markets: Implications for Pricing, Innovation, and Compatibility Choice," Working Papers 03-02, NET Institute, revised Oct 2003. [Downloadable!]
  2. Jay Pil Choi, 1998. "Tying and Innovation: A Dynamic Analysis of Tying Arrangements," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Edmond Baranes, 2006. "Bundling and Collusion on Communications Markets," Working Papers 06-17, NET Institute, revised Oct 2006. [Downloadable!]
  4. Dennis W. Carlton & Joshua S. Gans & Michael Waldman, 2007. "Why Tie A Product Consumers Do Not Use?," NBER Working Papers 13339, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Jeffrey Church & Neil Gandal, 1993. "Equilibrium Foreclosure and Complementary Products," Industrial Organization 9311001, EconWPA. [Downloadable!]
    Other versions:
  6. David Spector, 2006. "Tying, bundling and collusion," PSE Working Papers 2006-02, PSE (Ecole normale supérieure). [Downloadable!]
  7. Jay Pil Choi, 2007. "Tying in Two-Sided Markets with Multi-Homing," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  8. Alain Egli, 2005. "On Stability in Competition: Tying and Horizontal Product Differentiation," Diskussionsschriften dp0501, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  9. Sang Kim & Dong-Ju Kim, 2005. "One-phone service and mobile market foreclosure," Netnomics, Springer, vol. 7(1), pages 59-68, April. [Downloadable!] (restricted)
  10. Reisinger, Markus, 2004. "The Effects of Product Bundling in Duopoly," Discussion Papers in Economics 477, University of Munich, Department of Economics. [Downloadable!]
  11. Alain Egli, 2007. "On Stability in Competition: Tying and Horizontal Product Differentiation," Review of Industrial Organization, Springer, vol. 30(1), pages 29-38, February. [Downloadable!] (restricted)
  12. Jay Pil Choi, 2004. "Antitrust Analysis of Tying Arrangements," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  13. SHIM, Sunghee & OH, Jungsuk, 2006. "Service Bundling and the Role of Access Charge in the Broadband Internet Service Market," MPRA Paper 3553, University Library of Munich, Germany. [Downloadable!]
  14. Hamilton, Stephen F. & Innes, Robert, 2006. "Vertical Restraints and Horizontal Control," 2006 Annual meeting, July 23-26, Long Beach, CA 21424, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
    Other versions:
  15. Sällström, Susanna, 2009. "Functional Differentiation," CEPR Discussion Papers 7187, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  16. Sällström Matthews, S.E., 2007. "Multi-Purpose Consumption and Functional Differentiation: Why has the Vibrant Galleria replaced the Good Old Fashioned Department Store?," Cambridge Working Papers in Economics 0727, Faculty of Economics, University of Cambridge. [Downloadable!]
  17. Oilver Budzinski & Katharina Wacker, 2007. "The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control?," Marburg Working Papers on Economics 200704, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
  18. Justin Ho & Katherine Ho & Julie Holland Mortimer, 2008. "Welfare Effects of Full-line Forcing Contracts in the Video Rental Industry," NBER Working Papers 14588, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Sue Mialon, 2009. "Exclusionary Bundling: The Motive for Mergers," Emory Economics 0907, Department of Economics, Emory University (Atlanta). [Downloadable!]
  20. Alain Egli, 2004. "On Holders, Blades and Other Tie-In Sales," Diskussionsschriften dp0417, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  21. Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, EconWPA. [Downloadable!]
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