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Multimarket Contact, Bundling and Collusive Behavior

Author

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  • Juan-Pablo Montero

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

  • Esperanza Johnson

Abstract

We study the static and dynamic implications of non-linear pricing schemes (i.e., bundling) for otherwise unrelated products but for multimarket contact. Bundling is always present in competition but unlikely in a cartel agreement. Although it brings extra profits to the cartel –sometimes charging a premium rather than a discount for the bundle–, bundling makes deviation from the agreement far more attractive. Depending on the correlation of consumers’ preferences, this deviation effect is either reinforced with milder punishments (for positive correlations) or partially offset with harsher punishments (for negative correlations). The deviation effect is so strong that it even dominates a zero-profit (pure-bundling) punishment.

Suggested Citation

  • Juan-Pablo Montero & Esperanza Johnson, 2012. "Multimarket Contact, Bundling and Collusive Behavior," Documentos de Trabajo 420, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:420
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    File URL: https://www.economia.uc.cl/docs/doctra/dt-420.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    multimarket contact; conglomerate merger; bundling; collusion;
    All these keywords.

    JEL classification:

    • 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

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