Endogenous Mergers of Complements with Mixed Bundling
This paper studies endogenous mergers of complements with mixed bundling, by allowing both for joint and separate consumption. After merger, partner fi…rms decrease the price of the bundled system. Besides, when markets for individual components are suffi…ciently important, partner …firms raise prices of stand-alone products, exploiting their monopoly power in local markets and making substitute 'mix-and-match' composite products less attractive to consumers. Even though these effects favor the pro fitability of mergers, merging is not always an equilibrium outcome. The reason is that outsiders respond by cutting their prices to retain their market share, and mergers can be unprofitable when competition is intense. From a welfare analysis, we observe that the number of mergers observed in equilibrium may be either excessive (when markets for individual components are important) or suboptimal (when markets for individual components are less important). Keywords: complements; merger; mixed bundling; separate consumption JEL classi…fication: L13; L41; D43
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Hendricks, K. & Piccione, M. & Tan, G., 1997.
"Equilibria in networks,"
Discussion Paper Series In Economics And Econometrics
9717, Economics Division, School of Social Sciences, University of Southampton.
- 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 105-23, March.
- Liao, Chun-Hsiung & Tauman, Yair, 2002. "The role of bundling in price competition," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 365-389, March.
- Beggs, Alan W, 1994. "Mergers and Malls," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 419-28, December.
- GABZEWICZ, Jean & SONNAC, Nathalie & WAUTHY, Xavier, .
"On price competition with complementary goods,"
CORE Discussion Papers RP
-1505, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 503-45, October.
- Church, J. & Gandal, N., 1996.
"Systems Competition, Vertical Merger and Foreclosure,"
6-96, Tel Aviv - the Sackler Institute of Economic Studies.
- Jeffrey Church & Neil Gandal, 2000. "Systems Competition, Vertical Merger, and Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(1), pages 25-51, 03.
- Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February.
- Jan K. Brueckner, 2003. "International Airfares in the Age of Alliances: The Effects of Codesharing and Antitrust Immunity," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 105-118, February.
- 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.
- Denicolo, Vincenzo, 2000. "Compatibility and Bundling with Generalist and Specialist Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 177-88, June.
- Kamien, Morton I & Zang, Israel, 1990.
"The Limits of Monopolization through Acquisition,"
The Quarterly Journal of Economics,
MIT Press, vol. 105(2), pages 465-99, May.
- Morton I. Kamien & Israel Zang, 1988. "The Limits of Monopolization Through Acquisition," Discussion Papers 802, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Morton I. Kamien & Israel Zang, 1987. "The Limits of Monopolization Through Acquisition," Discussion Papers 754, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jay Pil Choi, 2008. "MERGERS WITH BUNDLING IN COMPLEMENTARY MARKETS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 553-577, 09.
- Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 37-54, March.
- 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.
- Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1475-1498, December.
- Ken Hendricks & Michele Piccione & Guofu Tan, 1997. "Entry and Exit in Hub-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 291-303, Summer.
- 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.
- Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 323-342, September.
- Gaudet, Gerard & Salant, Stephen W., 1992. "Mergers of producers of perfect complements competing in price," Economics Letters, Elsevier, vol. 39(3), pages 359-364, July.
- Barry Nalebuff, 2002. "Bundling and the GE-Honeywell Merger," Yale School of Management Working Papers ysm303, Yale School of Management.
- Damien Neven & Miguel Mano, 2009. "Economics at DG Competition, 2008–2009," Review of Industrial Organization, Springer, vol. 35(4), pages 317-347, December.
- Anderson, Simon P. & Loertscher, Simon & Schneider, Yves, 2010. "The ABC of complementary products mergers," Economics Letters, Elsevier, vol. 106(3), pages 212-215, March.
- Michael D. Whinston, 1989.
"Tying, Foreclosure, and Exclusion,"
NBER Working Papers
2995, National Bureau of Economic Research, Inc.
- W. Whalen, 2007. "A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets," Review of Industrial Organization, Springer, vol. 30(1), pages 39-61, February.
When requesting a correction, please mention this item's handle: RePEc:kap:revind:v:39:y:2011:i:3:p:231-251. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.