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Safe Harbors for Quantity Discounts and Bundling

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Author Info

  • 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.

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File URL: http://www.justice.gov/atr/public/eag/230712.pdf
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Bibliographic Info

Paper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 200801.

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Length: 11 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:doj:eagpap:200801

Contact details of provider:
Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530
Email:
Web page: http://www.justice.gov/atr/
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Related research

Keywords: Tying; Bundling; Safe Harbor; Antitrust;

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References

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  1. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," EAG Discussions Papers 200703, Department of Justice, Antitrust Division.
  2. 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.
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Citations

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Cited by:
  1. 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.
  2. Calzolari, Giacomo & Denicolò, Vincenzo, 2010. "Competitive quantity discounts," CEPR Discussion Papers 8144, C.E.P.R. Discussion Papers.
  3. Dennis W. Carlton & Ken Heyer, 2008. "Appropriate Antitrust Policy Towards Single-Firm Conduct," EAG Discussions Papers 200802, Department of Justice, Antitrust Division.

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