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Buyer Power, Upstream Bundling, and Foreclosure

Author

Listed:
  • Claire Chambolle

    (ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

  • Hugo Molina

    (ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

This article provides a new rationale for the "leverage theory" of bundling in vertical markets. We analyze a framework with a capacity-constrained retailer and uncover that buyer power explains the emergence of bundling practices by a multi-product manufacturer to foreclose a more efficient upstream rival. We further show that the retailer may counteract this adverse effect by expanding its stocking capacity. Finally, we highlight that a ban on bundling practices may restore the retailer's incentives to restrict its stocking capacity which generates detrimental effects for welfare.

Suggested Citation

  • Claire Chambolle & Hugo Molina, 2020. "Buyer Power, Upstream Bundling, and Foreclosure," Working Papers hal-02960034, HAL.
    • Handle: RePEc:hal:wpaper:hal-02960034
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    Cited by:

    1. Claire Chambolle & Hugo Molina, 2021. "A Buyer Power Theory of Exclusive Dealing and Exclusionary Bundling," Working Papers hal-03231803, HAL.
    2. Lømo, Teis Lunde & Meland, Frode & Sandvik, Håvard Mork, 2020. "Do slotting allowances reduce product variety?," Working Papers in Economics 7/20, University of Bergen, Department of Economics.

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