Competitive mixed bundling of vertically differentiated products
AbstractWe examine mixed bundling in a competitive environment that incorporates vertical product differentiation. We show that, compared to the equilibrium without bundling, (i) prices, profits and social welfare are lower, whereas (ii) consumer surplus is higher in the equilibrium with mixed bundling. In addition, the population of consumers who purchase both products from the same firm is larger in the equilibrium with mixed bundling. Further, when the quality gap between brands narrows under no bundling and symmetric mixed bundling, prices and profits decrease but social welfare and consumer surplus increase. When quality differentiation is asymmetric across products, however, complicated effects occur on prices and profits due to strategic interdependence that mixed bundling creates.
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Bibliographic InfoPaper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 1101.
Date of creation: 2011
Date of revision:
mixed bundling; vertical differentiation; quality advantage; competitive bundling;
Other versions of this item:
- Ahn Illtae & Yoon Kiho, 2012. "Competitive Mixed Bundling of Vertically Differentiated Products," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-54, November.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-BEC-2011-01-30 (Business Economics)
- NEP-COM-2011-01-30 (Industrial Competition)
- NEP-IND-2011-01-30 (Industrial Organization)
- NEP-MIC-2011-01-30 (Microeconomics)
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- repec:bla:restud:v:77:y:2010:i:1:p:30-60 is not listed on IDEAS
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