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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
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)
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.:
- Thisse, J.-F. & Vives, X., 1987.
"On the strategic choice of spatial price policy,"
CORE Discussion Papers
1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
- 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.
- Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
- Joshua S. Gans & Stephen P. King, 2006. "PAYING FOR LOYALTY: PRODUCT BUNDLING IN OLIGOPOLY -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 43-62, 03.
- Armstrong, M., 2006.
"Recent developments in the economics of price discrimination,"
Open Access publications from University College London
http://discovery.ucl.ac.u, University College London.
- Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, EconWPA.
- 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.
- Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-50, March.
- Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-62, Winter.
- 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.
- Illtae Ahn & Kiho Yoon, 2011.
"Competitive mixed bundling of vertically differentiated products,"
Discussion Paper Series
1101, Institute of Economic Research, Korea University.
- Ahn Illtae & Yoon Kiho, 2012. "Competitive Mixed Bundling of Vertically Differentiated Products," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-54, November.
- Armstrong, Mark, 2012.
"A more general theory of commodity bundling,"
37375, University Library of Munich, Germany.
- Hoernig, Steffen & Valletti, Tommaso, 2010.
"When two-part tariffs are not enough: Mixing with nonlinear pricing,"
CEPR Discussion Papers
7720, C.E.P.R. Discussion Papers.
- Hoernig Steffen & Valletti Tommaso M., 2011. "When Two-Part Tariffs are Not Enough: Mixing with Nonlinear Pricing," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-20, October.
- Armstrong, Mark & Vickers, John, 2006.
"Competitive nonlinear pricing and bundling,"
70, University Library of Munich, Germany.
- Armstrong, Mark, 2010.
"Bundling revisited: substitute products and inter-firm discounts,"
26782, University Library of Munich, Germany.
- Mark Armstrong, 2011. "Bundling Revisited: Substitute Products and Inter-Firm Discounts," Economics Series Working Papers 574, University of Oxford, Department of Economics.
- Juan-Pablo Montero & Esperanza Johnson, 2012. "Multimarket Contact, Bundling and Collusive Behavior," Documentos de Trabajo 420, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Liangy, Julienne & Petulowa, Marc, 2012. "Mobile only users powered by fixed-mobile substitution," 23rd European Regional ITS Conference, Vienna 2012 60363, International Telecommunications Society (ITS).
- Takanori Adachi & Takeshi Ebina & Makoto Hanazono, 2011. "Option Package Bundling," KIER Working Papers 785, Kyoto University, Institute of Economic Research.
- Granier, Laurent & Podesta, Marion, 2010. "Bundling and Mergers in Energy Markets," Energy Economics, Elsevier, vol. 32(6), pages 1316-1324, November.
- Marie-Noëlle Calès & Laurent Granier & Nadège Marchand, 2012.
"Competition between clearing houses on the European market,"
- Marie-Noëlle Calès & Laurent Granier & Nadège Marchand, 2012. "Competition between clearing houses on the European market," Working Papers 1206, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Begoña García-Mariñoso & Xavier Martinez-Giralt & Pau Olivella, 2008.
"Bundling in Telecommunications,"
UFAE and IAE Working Papers
762.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Zhou, Jidong, 2011. "Multiproduct search," MPRA Paper 37139, University Library of Munich, Germany.
- Marvel, Howard P. & Yang, Huanxing, 2008. "Group purchasing, nonlinear tariffs, and oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1090-1105, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).
If references are entirely missing, you can add them using this form.