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Bundling and Collusion on Communications Markets

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  • Edmond Baranes

    ()
    (University of Montpellier)

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    Abstract

    This paper deals with competition in communications markets between an incumbent and an entrant. We analyze the effect of bundling strategy by a firm who enters an incumbent market. This market dimension has profound implications on the sustainability of collusion in an infinitely repeated game framework. We show that the bundling strategy of the entrant might hinder collusion. Futhermore, we consider a setting in which the entrant uses a one-way access that the incumbent possesses. In such situation, we show that when the entrant bundles its products, a low access charge for call termination on the incumbent network might increase the feasibility of collusion. This result has an important policy implication.

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    File URL: http://www.netinst.org/Baranes.pdf
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    Bibliographic Info

    Paper provided by NET Institute in its series Working Papers with number 06-17.

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    Length: 28 pages
    Date of creation: Oct 2006
    Date of revision: Oct 2006
    Handle: RePEc:net:wpaper:0617

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    Web page: http://www.NETinst.org/

    Related research

    Keywords: Bindling; Collusion; Differentiation.;

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    1. Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer.
    2. Nicholas Economides, 2001. "The Microsoft Antitrust Case: Rejoinder," Journal of Industry, Competition and Trade, Springer, vol. 1(1), pages 71-79, March.
    3. Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
    4. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-59, September.
    5. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    6. David Spector, 2006. "Bundling, tying and collusion," PSE Working Papers halshs-00590553, HAL.
    7. Choi, Jay Pil & Stefanadis, Christodoulos, 2001. "Tying, Investment, and the Dynamic Leverage Theory," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 52-71, Spring.
    8. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, vol. 49(2), pages 341-358, February.
    9. SHIM, Sunghee & OH, Jungsuk, 2006. "Service Bundling and the Role of Access Charge in the Broadband Internet Service Market," MPRA Paper 3553, University Library of Munich, Germany.
    10. Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 37-54, March.
    11. Cambini, Carlo & Valletti, Tommaso, 2003. "Investments and Network Competition," CEPR Discussion Papers 3829, C.E.P.R. Discussion Papers.
    12. Nicholas Economides, 2001. "The Microsoft Antitrust Case," Journal of Industry, Competition and Trade, Springer, vol. 1(1), pages 7-39, March.
    13. Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 283-98, March.
    14. Dessein, Wouter, 2004. "Network competition with heterogeneous customers and calling patterns," Information Economics and Policy, Elsevier, vol. 16(3), pages 323-345, September.
    15. 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.
    16. 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.
    17. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
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