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Strategic and Welfare Implications of Bundling

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Author Info
Stephen Martin (Institute of Economics, University of Copenhagen)

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Abstract

A standard oligopoly model of bundling shows that bundling by a firm with a monopoly over one product has a strategic effect because it changes the substitution relationships between the goods among which consumers choose. Bundling in appropriate proportions is privately profitable, reduces rivals´ profits and overall welfare, and may drive rivals from the market.

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File URL: http://www.econ.ku.dk/CIE/Discussion%20Papers/1998/PdfFiles/9814.pdf
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Publisher Info
Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 1998-14.

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Length: 7 pages
Date of creation: Sep 1998
Date of revision:
Publication status: Published in: Economics Letters. March 1999, 62(3) pp 371-76
Handle: RePEc:kud:kuieci:1998-14

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Related research
Keywords: bundling; tying;

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Find related papers by JEL classification:
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
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

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August. [Downloadable!] (restricted)
  2. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May. [Downloadable!] (restricted)
  3. Margaret E. Slade, 1998. "The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising," Southern Economic Journal, Southern Economic Association, vol. 65(2), pages 204-222, October.
  4. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January. [Downloadable!] (restricted)
  5. Slade, M.E., 1997. "The leverage Theory of Tying Revisited," UBC Departmental Archives 97-9, UBC Department of Economics.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alain Egli, 2007. "On Stability in Competition: Tying and Horizontal Product Differentiation," Review of Industrial Organization, Springer, vol. 30(1), pages 29-38, February. [Downloadable!] (restricted)
  2. Oilver Budzinski & Katharina Wacker, 2007. "The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control?," Marburg Working Papers on Economics 200704, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
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