Evaluating the Profitability of Product Bundling in the Context of Negotiations
AbstractI develop a model to evaluate the profitability of product bundling in the context of negotiations between a monopolist and intermediaries that sell its products to consumers. I investigate whether the monopolist finds it feasible and advantageous to utilize product bundling to block negotiations between the intermediaries and a rival firm, which competes against the monopolist in a complementary market. My model demonstrates that bundling can be affected by intermediate bargaining power. Specifically, while the example I consider supports the profitability of product bundling when the monopolist sells its product directly to consumers, the existence of negotiations with intermediaries may reverse this result.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 77 (2004)
Issue (Month): 4 (October)
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Web page: http://www.journals.uchicago.edu/JB/
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