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Bundling and Competition for Slots: On the Portfolio Effects of Bundling

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Author Info
Doh-Shin Jeon
Domenico Menicucci

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Abstract

We consider competition among sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. We study how bundling affects competition for slots. Under independent pricing, equilibrium often does not exist and hence the outcome is often inefficient. When bundling is allowed, each seller has an incentive to bundle his products and an efficient equilibrium always exists. Furthermore, in the case of digital goods, all equilibria are efficient if slotting contracts are prohibited. We also identify portfolio effects of bundling and analyze the consequences on horizontal mergers. Finally, we derive clear-cut policy implications.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1152.

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Date of creation: Feb 2009
Date of revision: Jul 2009
Handle: RePEc:upf:upfgen:1152

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Related research
Keywords: Bundling; Portfolios; Slots (or Shelf Space); Pure Bundling; Slotting Contracts; Exclusive Dealing; Foreclosure;

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Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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References listed on IDEAS
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.:
  1. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January. [Downloadable!] (restricted)
  2. Salinger, Michael A, 1995. "A Graphical Analysis of Bundling," Journal of Business, University of Chicago Press, vol. 68(1), pages 85-98, January. [Downloadable!] (restricted)
  3. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February. [Downloadable!] (restricted)
  4. B. Douglas Bernheim & Michael D. Whinston, 1985. "Common Marketing Agency as a Device for Facilitating Collusion," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 269-281, Summer. [Downloadable!] (restricted)
  5. 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.
  6. Dennis W. Carlton & Michael Waldman, 2002. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 194-220, Summer.
    Other versions:
  7. Hanssen, F Andrew, 2000. "The Block Booking of Films Reexamined," Journal of Law & Economics, University of Chicago Press, vol. 43(2), pages 395-426, October.
  8. Doh-Shin Jeon & Domenico Menicucci, 2009. "Bundling and Competition for Slots: Sequential Pricing," Economics Working Papers 1168, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  9. Kenney, Roy W & Klein, Benjamin, 1983. "The Economics of Block Booking," Journal of Law & Economics, University of Chicago Press, vol. 26(3), pages 497-540, October.
  10. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  11. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February. [Downloadable!] (restricted)
  12. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-59, September. [Downloadable!] (restricted)
  13. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January. [Downloadable!] (restricted)
  14. 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. [Downloadable!] (restricted)
  15. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February. [Downloadable!] (restricted)
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  16. Doh-Shin Jeon & Domenico Menicucci, 2006. "Bundling Electronic Journals and Competition among Publishers," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1038-1083, 09. [Downloadable!] (restricted)
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  1. Jeon, Doh-Shin & Menicucci, Dominico, 2009. "Bundling and Competition for Slots: Sequential Pricing," IDEI Working Papers 576, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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