The strategic effect of bundling: a new perspective
AbstractThis paper investigates the strategic effect of bundling when a multi-product firm producing two complements faces competition in both markets. I consider a demand structure where both Cournot and Bertrand competition can be evaluated. Bundling is completely ineffective when firms compete in quantities. On the contrary, under Bertrand competition, selling the two goods in a package is profitable when the goods produced by the rivals are perceived as close substitutes to those produced by the multi-product firm. Bundling drives prices up, and not only consumer surplus, but also social welfare shrinks, thus calling for the intervention of the antitrust agency.
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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 705.
Date of creation: Jun 2010
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Other versions of this item:
- Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer, vol. 42(1), pages 25-43, February.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-18 (All new papers)
- NEP-BEC-2010-06-18 (Business Economics)
- NEP-COM-2010-06-18 (Industrial Competition)
- NEP-CSE-2010-06-18 (Economics of Strategic Management)
- NEP-IND-2010-06-18 (Industrial Organization)
- NEP-MKT-2010-06-18 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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