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Price discrimination through transactions bundling: The case of monopsony

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  • Dassiou, Xeni
  • Glycopantis, Dionysius

Abstract

This paper shows that for a price setting monopsony, offering to transact in a mixed bundle of goods of uncertain quality is profit enhancing. The magnitude of this enhancement relative to no bundling is greater the smaller the gap in the degree of quality uncertainty between the two goods purchased is. Moreover, contrary to coventional wisdom, the use of mixed purchase bundling by a monopsonist is trade enhancing. There is more room for a dramatic improvement in the volume of trade in a good with a low degree of quality certainty if its purchase is combined with a good of a substantially higher quality certainty.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 44 (2008)
Issue (Month): 7-8 (July)
Pages: 672-681

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Handle: RePEc:eee:mateco:v:44:y:2008:i:7-8:p:672-681

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Web page: http://www.elsevier.com/locate/jmateco

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  1. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
  2. 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.
  3. Michael D. Whinston, 1989. "Tying, Foreclosure, and Exclusion," NBER Working Papers 2995, National Bureau of Economic Research, Inc.
  4. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February.
  5. 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.
  6. Indranil Chakraborty, 1999. "Bundling decisions for selling multiple objects," Economic Theory, Springer, vol. 13(3), pages 723-733.
  7. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
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