Bundling Revisited: Substitute Products and Inter-Firm Discounts
AbstractThis paper extends the standard model of bundling to allow products to be substitutes and for products to be supplied by separate sellers.� Whether integrated or separate, firms have an incentive to introduce a bundling discount when demand for the bundle is elastic relative to demand for stand-alone products.� When products are partial substitutes, this typically gives an integrated firm a greater incentive to offer a bundle discount (relative to the standard model with additive preferences), while product substitutability is often the sole reason why separate sellers wish to offer inter-firm discounts.� When separate sellers negotiate their inter-firm discount, they can use the discount to relax competition.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 574.
Date of creation: 01 Oct 2011
Date of revision:
Bundling; Price discrimination; Oligopoly; Collusion;
Other versions of this item:
- Armstrong, Mark, 2010. "Bundling revisited: substitute products and inter-firm discounts," MPRA Paper 26782, University Library of Munich, Germany.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-01 (All new papers)
- NEP-BEC-2011-11-01 (Business Economics)
- NEP-COM-2011-11-01 (Industrial Competition)
- NEP-IND-2011-11-01 (Industrial Organization)
- NEP-MKT-2011-11-01 (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.:
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