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A more general theory of commodity bundling

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  • Armstrong, Mark

Abstract

This paper discusses the incentive to bundle when consumer valuations are non-additive and/or when products are supplied by separate sellers. Whether integrated or separate, a firm has an incentive to introduce a bundle discount when demand for the bundle is more elastic than the overall demand for products. When separate sellers coordinate on a bundle discount, they can use the discount to relax competition, which can harm welfare.

Suggested Citation

  • Armstrong, Mark, 2013. "A more general theory of commodity bundling," Journal of Economic Theory, Elsevier, vol. 148(2), pages 448-472.
    • Handle: RePEc:eee:jetheo:v:148:y:2013:i:2:p:448-472
    DOI: 10.1016/j.jet.2012.12.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Price discrimination; Bundling; Discrete choice; Oligopoly; Common agency;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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