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Transactions Bundling in Monopsonistic Markets; Theory and Numerical Implications

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  • Dassiou, X.
  • Glycopantis, Dionysius

Abstract

We show that for a price-setting monopsony, offering a mixed bundle in the transactions in goods of uncertain quality is profit enhancing and, contrary to conventional wisdom, is trade enhancing. The magnitude of the improvement in expected profits (volume of trade) relative to no bundling is greater the smaller (larger) the gap in the degree of quality uncertainty between the two goods. Also importantly, but on a smaller scale, if the degree of quality uncertainty between the two goods is equal, the expected profits (volume of trade) improvement is an increasing (decreasing) function of this common degree.

Suggested Citation

  • Dassiou, X. & Glycopantis, Dionysius, 2012. "Transactions Bundling in Monopsonistic Markets; Theory and Numerical Implications," The Journal of Economic Asymmetries, Elsevier, vol. 9(1), pages 105-131.
    • Handle: RePEc:eee:joecas:v:9:y:2012:i:1:p:105-131
    DOI: 10.1016/j.jeca.2012.01.006
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    References listed on IDEAS

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    1. Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
    2. Lucking-Reiley, David, 2000. "Auctions on the Internet: What's Being Auctioned, and How?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 227-252, September.
    3. Dassiou Xeni & Glycopantis Dionysious, 2006. "The Economic Theory of Price Discrimination via Transactions Bundling: An Assessment of the Policy Implications," Review of Law & Economics, De Gruyter, vol. 2(2), pages 323-348, October.
    4. Dionysius Glycopantis & Allan Muir & Nicholas Yannelis, 2005. "Non-implementation of rational expectations as a perfect Bayesian equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 765-791, November.
    5. Dassiou Xeni & Choi Chong Ju & Maldoom Dan, 2004. "Trade and Linked Exchange; Price Discrimination Through Transaction Bundling," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-17, May.
    6. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 475-498.
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    More about this item

    Keywords

    D4; D8; Monopsony; Price discrimination; Mixed bundling; Quality uncertainty; Partner preference; Profit enhancing; Trade enhancing;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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