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To Bundle or Not to Bundle: Firms' Choices under Pure Bundling

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Author Info

  • R. Glenn Hubbard
  • Atanu Saha
  • Jungmin Lee
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    Abstract

    We examine the economic implications of pure bundling under the settings of monopoly and duopoly. We show that under monopoly and pure bundling of goods with independent demands, the bundled price is strictly less than the sum of the unbundled prices. In the setting of duopoly and Nash prices, we examine whether bundling can be used as a tool to deter entry. In contrast to the findings of previous studies, we show that with low entry costs, entry is deterred by unbundled as opposed to bundled sales. With high entry costs, however, the incumbent chooses to bundle.

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    File URL: http://www.tandfonline.com/10.1080/13571510601097140
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

    Volume (Year): 14 (2007)
    Issue (Month): 1 ()
    Pages: 59-83

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    Handle: RePEc:taf:ijecbs:v:14:y:2007:i:1:p:59-83

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    Web page: http://www.tandfonline.com/CIJB20

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    Web: http://www.tandfonline.com/pricing/journal/CIJB20

    Related research

    Keywords: Pure Bundling; Monopoly; Duopoly; Entry Costs;

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    Cited by:
    1. Sheikhzadeh, Mehdi & Elahi, Ehsan, 2013. "Product bundling: Impacts of product heterogeneity and risk considerations," International Journal of Production Economics, Elsevier, vol. 144(1), pages 209-222.

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