Bundling and Foreclosure
AbstractWe examine a two-sector model characterized by monopoly provision in market 1 and perfect competition in market 2. We follow the set up in Martin (1999), but we consider the case where goods 1 and 2 can be either substitutes or complements. With this framework, we analyse the profit sacrifice required if the monopolist offers a bundle consisting of one unit of good 1 and k units of good 2 to foreclose the competitive sector. Our results show that foreclosing rivals via bundling is less costly when products are complements rather than substitutes.
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Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2006-478.
Length: 9 pages
Date of creation: Jun 2006
Date of revision:
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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- Martin, Stephen, 1999.
"Strategic and welfare implications of bundling,"
Elsevier, vol. 62(3), pages 371-376, March.
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