This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Effects of Product Bundling in Duopoly

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Reisinger, Markus
Abstract

This paper studies the incentives for multiproduct duopolists to sell their products as a bundle. It is shown that contrary to the monopoly case bundling may reduce profits and increase consumer rent. This is the case if consumers' reservation values are negatively correlated. The reason is that bundling reduces consumer heterogeneity and makes price competition more aggressive. This effect can dominate the sorting effect that is well known for the monopoly case. Firms are in a prisoner's dilemma situation because they would be better off without bundling. Despite the lower prices a welfare loss occurs because some consumers do not buy their prefered product which results in distributive inefficiency. If firms can influence the correlation by choosing their location in the product range they try to avoid negative correlation and choose minimal differentiation in one good.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://epub.ub.uni-muenchen.de/477/1/munichbundle.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 477.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:lmu:muenec:477

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://www.vwl.uni-muenchen.de
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).

Related research
Keywords: Product Bundling ; Price Competition ; Price Discrimination ; Product Differentiation;

Find related papers by JEL classification:
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:

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. Frank Mathewson & Ralph A. Winter, 1997. "Tying as a Response to Demand Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 566-583, Autumn. [Downloadable!] (restricted)
  2. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September. [Downloadable!] (restricted)
  3. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January. [Downloadable!] (restricted)
  4. Jay Pil Choi, 1995. "Preemptive R&D, Rent Dissipation and the "Leverage Theory"," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
    Other versions:
  5. Denicolo, Vincenzo, 2000. "Compatibility and Bundling with Generalist and Specialist Firms," Journal of Industrial Economics, Blackwell Publishing, vol. 48(2), pages 177-88, June. [Downloadable!] (restricted)
  6. Anderson, Simon P. & Leruth, Luc, 1993. "Why firms may prefer not to price discriminate via mixed bundling," International Journal of Industrial Organization, Elsevier, vol. 11(1), pages 49-61, March. [Downloadable!] (restricted)
  7. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February. [Downloadable!] (restricted)
  8. Neven, Damien J., 1986. "On Hotelling's competition with non-uniform customer distributions," Economics Letters, Elsevier, vol. 21(2), pages 121-126. [Downloadable!] (restricted)
  9. Seidmann, Daniel J, 1991. "Bundling as a Facilitating Device: A Reinterpretation of Leverage Theory," Economica, London School of Economics and Political Science, vol. 58(232), pages 491-99, November. [Downloadable!] (restricted)
  10. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
  11. Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Blackwell Publishing, vol. 38(3), pages 283-98, March. [Downloadable!] (restricted)
  12. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227. [Downloadable!] (restricted)
  13. Chen, Yongmin, 1997. "Equilibrium Product Bundling," Journal of Business, University of Chicago Press, vol. 70(1), pages 85-103, January. [Downloadable!] (restricted)
  14. 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)
  15. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier. [Downloadable!] (restricted)
  16. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May. [Downloadable!] (restricted)
  17. Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Blackwell Publishing, vol. 40(1), pages 37-54, March. [Downloadable!] (restricted)
  18. Anderson, Simon P. & Goeree, Jacob K. & Ramer, Roald, 1997. "Location, Location, Location," Journal of Economic Theory, Elsevier, vol. 77(1), pages 102-127, November. [Downloadable!] (restricted)
  19. Jeremy I. Bulow & John Geanakoplos & Paul D. Klemperer, 1983. "Multimarket Oligopoly," Cowles Foundation Discussion Papers 674, Cowles Foundation, Yale University. [Downloadable!]
  20. Andreas IRMEN & Jean-François THISSE, 1996. "Competition in Multi-Characteristics Spaces: Hotelling Was Almost Right," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9613, Université de Lausanne, Faculté des HEC, DEEP.
    Other versions:
  21. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-59, September. [Downloadable!] (restricted)
Full references

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. Edmond Baranes, 2006. "Bundling and Collusion on Communications Markets," Working Papers 06-17, NET Institute, revised Oct 2006. [Downloadable!]
  2. repec:mop:credwp:08.03.74 is not listed on IDEAS
Statistics
Access and download statistics

Did you know? All bibliographic data on IDEAS has been put in the public domain by the publishers.

This page was last updated on 2009-11-26.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.