Bundling by Competitors and the Sharing of Profits
AbstractWe discuss the effects of bundling two goods offered by two symmetric firms. This situation requires the use of some sharing rule for the profits from the sales of the bundle. We show that the choice of this rule may have substantial effects on prices and profits – even if the possible rules eventually yield equal shares. In particular, the use of the a priori equal sharing rule yields lower prices and profits, than a price weighted sharing rule. When competitors bundle, they can implicitly cooperate via the setting of the profit sharing rule and increase their profits at the expense of consumers. This issue calls for some further attention by regulators.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 12 (2007)
Issue (Month): 16 ()
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Other versions of this item:
- Victor Ginsburgh & ISRAEL Zang, 2007. "Bundling by competitors and the sharing of profits," ULB Institutional Repository 2013/7280, ULB -- Universite Libre de Bruxelles.
- GINSBURGH, Victor & ZANG, Israel, . "Bundling by competitors and the sharing of profits," CORE Discussion Papers RP -2026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- GINSBURGH, Victor & ZANG, Israel, 2005. "Bundling by competitors and the sharing of profits," CORE Discussion Papers 2005007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- L0 - Industrial Organization - - General
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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- Mathias Dewatripont & Victor Ginsburgh & Patrick Legros & Alexis Walckiers & Jean-Pierre Devroey & Marianne Dujardin & Françoise Vandooren & Pierre Dubois & Jérôme Foncel & Marc Ivaldi & Marie-Domi, 2006. "Study on the economic and technical evolution of the scientific publication markets in Europe," ULB Institutional Repository 2013/9545, ULB -- Universite Libre de Bruxelles.
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