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Bundling and Competition for Slots: On the Portfolio Effects of Bundling

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  • Jeon, Doh-Shin
  • Menicucci, Domenico

Abstract

We consider competition among sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. We study how bundling affects competition for slots. Under independent pricing, equilibrium often does not exist and hence the outcome is often inefficient. When bundling is allowed, each seller has an incentive to bundle his products and an efficient equilibrium always exists. Furthermore, in the case of digital goods, all equilibria are efficient if slotting contracts are prohibited. We also identify portfolio effects of bundling and analyze the consequences on horizontal mergers. Finally, we derive clear-cut policy implications.

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Bibliographic Info

Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 574.

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Date of creation: 27 Jul 2009
Date of revision: Jul 2011
Publication status: Published in American Economic Review, vol.�102, n°5, août 2012, p.�1957-1985.
Handle: RePEc:ide:wpaper:21219

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  1. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January.
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Cited by:
  1. Jeon, Doh-Shin & Menicucci, Domenico, 2009. "Bundling and Competition for Slots: Sequential Pricing," IDEI Working Papers 576, Institut d'Économie Industrielle (IDEI), Toulouse.

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