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Bundling and Competition for Slots: Sequential Pricing

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Author Info
Doh-Shin Jeon
Domenico Menicucci

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Abstract

In this paper we study, as in Jeon-Menicucci (2009), competition between sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. This paper considers sequential pricing and complements our main paper (Jeon- Menicucci, 2009) that considers simultaneous pricing. First, Jeon-Menicucci (2009) find that under simultaneous individual pricing, equilibrium often does not exist and hence the outcome is often inefficient. By contrast, equilibrium always exists under sequential individual pricing and we characterize it in this paper. We find that each seller faces a trade-off between the number of slots he occupies and surplus extraction per product, and there is no particular reason that this leads to an efficient allocation of slots. Second, Jeon-Menicucci (2009) find that when bundling is allowed, there always exists an efficient equilibrium but inefficient equilibria can also exist due to pure bundling (for physical products) or slotting contracts. Under sequential pricing, we find that all equilibria are efficient regardless of whether firms can use slotting contracts, and both for digital goods and for physical goods. Therefore, sequential pricing presents an even stronger case for laissez-faire in the matter of bundling than simultaneous pricing.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1168.

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Date of creation: Aug 2009
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Handle: RePEc:upf:upfgen:1168

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

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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)
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  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. 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.
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  13. Jeon, Doh-Shin & Menicucci, Dominico, 2009. "Bundling and Competition for Slots: On the Portfolio Effects of Bundling," IDEI Working Papers 574, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  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: On the Portfolio Effects of Bundling," IDEI Working Papers 574, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
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