Dominance and Competitive Bundling
AbstractWe study bundling by a dominant multi-product rm facing competition from a rival multi-product rm. Compared to competition under independent pricing, competition under pure bundling reduces (increases) each rm's pro t for low (high) levels of dominance, while for intermediate levels of dominance, it increases the dominant rm's pro t but reduces the rival's pro t. The latter result provides a justi cation for the use of contractual bundling to build entry barrier. When we allow for mixed bundling, we nd a threshold level of dominance above which the unique outcome is the one under pure bundling.
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Date of creation: 13 Aug 2013
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Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-13 (All new papers)
- NEP-COM-2013-09-13 (Industrial Competition)
- NEP-MIC-2013-09-13 (Microeconomics)
- NEP-MKT-2013-09-13 (Marketing)
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