Output Commitment through Product Bundling: Experimental Evidence
AbstractABSTRACT: We analyze the impact of product bundling in experimental markets. One firm has monopoly power in a first market but competes with another firm in a second market. We compare treatments where the multiproduct firm (i) always bundles, (ii) never bundles, and (iii) chooses whether or not to bundle. We also contrast the simultaneous and the sequential order of moves in the duopoly market. Our data indicate support for the theory of product bundling: with bundling and simultaneous moves, the multiproduct firm offers the predicted number of units. When the multiproduct firm is the Stackelberg leader, the predicted equilibrium is better attained with bundling, especially when it chooses to bundle, even though in theory bundling should not make a difference here. In sum, bundling works as a commitment device that enables the transfer of market power from one market to another.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-170/1.
Date of creation: 28 Nov 2011
Date of revision: 14 Jul 2013
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Cournot; commitment; experiments; product bundling; Stackelberg;
Other versions of this item:
- Jeroen Hinloopen & Wieland Müller & Hans-Theo Normann, 2011. "Output Commitment through Product Bundling: Experimental Evidence," Vienna Economics Papers 1112, University of Vienna, Department of Economics.
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- 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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