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Strategic and welfare implications of bundling

  • Martin, Stephen

A standard oligopoly model of bundling shows that bundling by a firm with a monopoly over one product has a strategic effect because it changes the substitution relationships between the goods among which consumers choose. Bundling in appropriate proportions is privately profitable, reduces rivals´ profits and overall welfare, and may drive rivals from the market.

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File URL: http://www.sciencedirect.com/science/article/B6V84-3W7XC0R-M/2/476f5a14a6e7dfcb080e8c797fc59ff7
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 62 (1999)
Issue (Month): 3 (March)
Pages: 371-376

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Handle: RePEc:eee:ecolet:v:62:y:1999:i:3:p:371-376
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  2. Margaret E. Slade, 1998. "The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising," Southern Economic Journal, Southern Economic Association, vol. 65(2), pages 204-222, October.
  3. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January.
  4. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
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