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Bundling

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Author Info
Barry Nalebuff () (School of Management)

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Abstract

In this paper, we look at the case for bundling in an oligopolistic environment. We show that bundling is a particularly effective entry-deterrent strategy. A company that has market power in two goods, A and B, can, by bundling them together, make it harder for a rival with only one of these goods to enter the market. Bundling allows an incumbent to defend both products without having to price low in each. The traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist. Although price discrimination provides a reason to bundle, the gains are small compared to the gains from the entry-deterrent effect.

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Publisher Info
Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm126.

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Date of creation: 22 Nov 1999
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Handle: RePEc:ysm:somwrk:ysm126

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Web page: http://mba.yale.edu/
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Related research
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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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This page was last updated on 2009-12-28.

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