Competitive Mixed Bundling and Consumer Surplus
AbstractMixed bundling in imperfectly competitive industries causes some prices to rise and others to fall. This paper studies under what conditions mixed bundling works for or against the consumer interest. We find that if buyers incur firm specific costs or have shop specific tastes then competitive mixed bundling lowers consumer surplus overall and raises profits - the same is true of competitive volume discounts. Competition without these discounts causes all prices to be kept low as larger customers are targeted; with discounts the prices for heavy users drop, but more is extracted from small users. The consumer surplus result is reversed if the differentiation between components as opposed to firms is key.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 263.
Date of creation: 01 May 2006
Date of revision:
Bundling; Loyalty Rebates; Volume Discounts; Competitive Price Discrimination;
Other versions of this item:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-13 (All new papers)
- NEP-COM-2006-05-13 (Industrial Competition)
- NEP-IND-2006-05-13 (Industrial Organization)
- NEP-MIC-2006-05-13 (Microeconomics)
- NEP-MKT-2006-05-13 (Marketing)
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