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MERGERS WITH BUNDLING IN COMPLEMENTARY MARKETS -super-

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  • JAY PIL CHOI

Abstract

This paper develops a simple model to analyze the effects of mergers in complementary system markets when the merged firm is able to engage in bundling. In particular, I analyze the impact of (mixed) bundling on pricing decisions for existing generations of products and derive welfare implications of mergers. The basic model is then extended to analyze industry dynamics where the implications of mergers for innovation incentives and technical tying/compatibility decisions are explored. I also consider the possibility of counter-merger and derive implications of the policy prescription that prohibits bundling as a condition for merger. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • Jay Pil Choi, 2008. "MERGERS WITH BUNDLING IN COMPLEMENTARY MARKETS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 553-577, September.
  • Handle: RePEc:bla:jindec:v:56:y:2008:i:3:p:553-577
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    References listed on IDEAS

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    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. 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.
    3. Jay Pil Choi, 2004. "Tying and innovation: A dynamic analysis of tying arrangements," Economic Journal, Royal Economic Society, vol. 114(492), pages 83-101, January.
    4. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
    5. Joshua S. Gans & Stephen P. King, 2006. "PAYING FOR LOYALTY: PRODUCT BUNDLING IN OLIGOPOLY -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 43-62, March.
    6. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
    7. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    8. Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 283-298, March.
    9. Salinger, Michael A, 1991. "Vertical Mergers in Multi-product Industries and Edgeworth's Paradox of Taxation," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 545-556, September.
    10. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
    11. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 159-187.
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    Citations

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    Cited by:

    1. Andrea Mantovani & Francisco Ruiz-Aliseda, 2016. "Equilibrium Innovation Ecosystems: The Dark Side of Collaborating with Complementors," Management Science, INFORMS, vol. 62(2), pages 534-549, February.
    2. Luigi Di Gaetano, 2015. "A Model of corporate donations to open source under hardware–software complementarity," Industrial and Corporate Change, Oxford University Press, vol. 24(1), pages 163-190.
    3. Halmenschlager, Christine & Mantovani, Andrea, 2017. "On the private and social desirability of mixed bundling in complementary markets with cost savings," Information Economics and Policy, Elsevier, vol. 39(C), pages 45-59.
    4. Andrea Mantovani & Jan Vandekerckhove, 2016. "The Strategic Interplay Between Bundling and Merging in Complementary Markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(1), pages 19-36, January.
    5. Sue H. Mialon, 2014. "Product Bundling And Incentives For Mergers And Strategic Alliances," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 562-575, April.
    6. O. Tarola & C. Vergari, 2012. "A note on acquisition of complements in a vertically differentiated market," Working Papers wp832, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 25-43, February.
    8. repec:eee:indorg:v:57:y:2018:i:c:p:1-34 is not listed on IDEAS
    9. Gayle, Philip G. & Thomas, Tyson, 2016. "Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 178-194.
    10. Matteo Alvisi & Emanuela Carbonara & Francesco Parisi, 2011. "Separating complements: the effects of competition and quality leadership," Journal of Economics, Springer, vol. 103(2), pages 107-131, June.
    11. Cristina Pardo-Garcia & Jose Sempere-Monerris, 2015. "Equilibrium mergers in a composite good industry with efficiencies," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(1), pages 101-127, March.
    12. Ricardo Flores-Fillol & Rafael Moner-Colonques, 2011. "Endogenous Mergers of Complements with Mixed Bundling," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(3), pages 231-251, November.
    13. Juan Vélez, 2017. "Merger Effects with Product Complementarity: Evidence from Colombia’s Telecommunications," Borradores de Economia 1018, Banco de la Republica de Colombia.

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