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Dominance and Competitive Bundling

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  • Hurkens, Sjaak
  • Jeon, Doh-Shin
  • Menicucci, Domenico

Abstract

We study bundling by a dominant multi-product firm facing competition from a rival multi-product firm. Compared to competition under independent pricing, competition under pure bundling reduces (increases) each firm's profit for low (high) levels of dominance, while for intermediate levels of dominance, it increases the dominant firm's profit but reduces the rival's profit. The latter result provides a justification for the use of contractual bundling to build entry barrier. When we allow for mixed bundling, we find a threshold level of dominance above which the unique outcome is the one under pure bundling.

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Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 13-423.

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Date of creation: 13 Aug 2013
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Handle: RePEc:tse:wpaper:27441

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Cited by:
  1. Joao Macieira & Pedro Pereira & Joao Vareda, 2013. "Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play," Working Papers 13-15, NET Institute.

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