Bundling by competitors and the sharing of profits
AbstractWe discuss the effects of bundling two goods offered by two symmetric firms. This situation requires the use of some sharing rule for the profits from the sales of the bundle. We show that the choice of this rule may have substantial effects on prices and profits â even if the possible rules eventually yield equal shares. In particular, the use of the a priori equal sharing rule yields lower prices and profits, than a price weighted sharing rule. When competitors bundle, they can implicitly cooperate via the setting of the profit sharing rule and increase their profits at the expense of consumers. This issue calls for some further attention by regulators.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2026.
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Note: In : Economics Bulletin, 12(16), 1-9, 2007
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Other versions of this item:
- Victor Ginsburgh & Israel Zang, 2007. "Bundling by Competitors and the Sharing of Profits," Economics Bulletin, AccessEcon, vol. 12(16), pages 1-9.
- GINSBURGH, Victor & ZANG, Israel, 2005. "Bundling by competitors and the sharing of profits," CORE Discussion Papers 2005007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Victor Ginsburgh & ISRAEL Zang, 2007. "Bundling by competitors and the sharing of profits," ULB Institutional Repository 2013/7280, ULB -- Universite Libre de Bruxelles.
- L0 - Industrial Organization - - General
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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CORE Discussion Papers
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