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Safe Harbors for Quantity Discounts and Bundling

Author

Listed:
  • Dennis W. Carlton

    (Economic Analysis Group, Antitrust Division, Department of Justice)

  • Michael Waldman

    (Cornell University)

Abstract

The courts and analysts continue to struggle to articulate safe harbors for a wide variety of common business pricing practices in which either a single product is sold at a discount if purchased in bulk or in which multiple products are bundled together at prices different from the ones that would emerge if the products were purchased separately. The phenomenon of tying in which the sale of one product is conditioned on the purchase of another is closely related to bundling. Its analysis relies on the same economics as that used to analyze bundling (see, e.g., Carlton and Waldman (2008)), though the law seems to make a distinction between the two. The need for safe harbors for common business pricing practices arises from the recognition that these practices often are motivated by efficiency and that a broad antitrust attack on them could cause more harm than good. In this essay, we analyze and propose safe harbors for quantity discounts and bundled products. In analyzing the latter case, we discuss the deficiencies of the particular safe harbor proposed in the report of the Antitrust Modernization Commission (2007) (AMC) of which Carlton was a member.

Suggested Citation

  • Dennis W. Carlton & Michael Waldman, 2008. "Safe Harbors for Quantity Discounts and Bundling," EAG Discussions Papers 200801, Department of Justice, Antitrust Division.
  • Handle: RePEc:doj:eagpap:200801
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    File URL: https://www.justice.gov/atr/public/eag/230712.pdf
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    References listed on IDEAS

    as
    1. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 155-176, Summer.
    2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    3. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 159-187.
    4. Dennis W. Carlton, 2001. "A General Analysis of Exclusionary Conduct and Refusal to Deal - Why Aspen and Kodak are Misguided," NBER Working Papers 8105, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Garrett, Daniel & Gomes, Renato & Maestri, Lucas, 2021. "Oligopoly under incomplete information: On the welfare effects of price discrimination," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    2. Dennis W. Carlton & Ken Heyer, 2008. "Appropriate Antitrust Policy Towards Single-Firm Conduct," EAG Discussions Papers 200802, Department of Justice, Antitrust Division.
    3. Calzolari, Giacomo & Denicolò, Vincenzo, 2011. "On the anti-competitive effects of quantity discounts," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 337-341, May.
    4. Calzolari, Giacomo & Denicolo, Vincenzo, 2010. "Competitive quantity discounts," CEPR Discussion Papers 8144, C.E.P.R. Discussion Papers.
    5. Daniel F. Garrett & Renato Gomes & Lucas Maestri, 2021. "Oligopoly under incomplete information: on the welfare effects of price discrimination," Post-Print hal-03515749, HAL.

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    More about this item

    Keywords

    Tying; Bundling; Safe Harbor; Antitrust;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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