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Strategic and Welfare Implications of Bundling

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  • Stephen Martin

    (Institute of Economics, University of Copenhagen)

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/dp/dp_1997-1999/1998-14.pdf/
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Bibliographic 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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Keywords: bundling; tying;

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References

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  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.
  2. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  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.
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Citations

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Cited by:
  1. Hinloopen, Jeroen & Müller, Wieland & Normann, Hans-Theo, 2013. "Output commitment through product bundling: Experimental evidence," DICE Discussion Papers 116, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  2. Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer, vol. 42(1), pages 25-43, February.
  3. Alain Egli, 2007. "On Stability in Competition: Tying and Horizontal Product Differentiation," Review of Industrial Organization, Springer, vol. 30(1), pages 29-38, February.
  4. Vaubourg, Anne-Gael, 2006. "Differentiation and discrimination in a duopoly with two bundles," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 753-762, July.
  5. Orbay, Hakan, 2009. "Computing Cournot equilibrium through maximization over prices," Economics Letters, Elsevier, vol. 105(1), pages 71-73, October.
  6. Akifumi Ishihara & Noriyuki Yanagawa, 2013. "Dark Sides of Patent Pools with Compulsory Independent Licensing," CARF F-Series CARF-F-318, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  7. 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).
  8. A. Mantovani & J. Vandekerckhove, 2012. "The strategic interplay between bundling and merging in complementary markets," Working Papers wp814, Dipartimento Scienze Economiche, Universita' di Bologna.
  9. Daniel Flores Curiel, 2010. "La regulación del tamaño de los lotes habitacionales: un modelo de discriminación de precios," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 25(2), pages 407-424.
  10. Cooper, James C. & Froeb, Luke M. & O'Brien, Dan & Vita, Michael G., 2005. "Vertical antitrust policy as a problem of inference," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 639-664, September.
  11. Yue, Xiaohang & Mukhopadhyay, Samar K. & Zhu, Xiaowei, 2006. "A Bertrand model of pricing of complementary goods under information asymmetry," Journal of Business Research, Elsevier, vol. 59(10-11), pages 1182-1192, October.
  12. Mukhopadhyay, Samar K. & Yue, Xiaohang & Zhu, Xiaowei, 2011. "A Stackelberg model of pricing of complementary goods under information asymmetry," International Journal of Production Economics, Elsevier, vol. 134(2), pages 424-433, December.
  13. Wei, Jie & Zhao, Jing & Li, Yongjian, 2013. "Pricing decisions for complementary products with firms’ different market powers," European Journal of Operational Research, Elsevier, vol. 224(3), pages 507-519.

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