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To Bundle or Not to Bundle: Firms' Choices under Pure Bundling

  • R. Glenn Hubbard
  • Atanu Saha
  • Jungmin Lee
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    We examine the economic implications of pure bundling under the settings of monopoly and duopoly. We show that under monopoly and pure bundling of goods with independent demands, the bundled price is strictly less than the sum of the unbundled prices. In the setting of duopoly and Nash prices, we examine whether bundling can be used as a tool to deter entry. In contrast to the findings of previous studies, we show that with low entry costs, entry is deterred by unbundled as opposed to bundled sales. With high entry costs, however, the incumbent chooses to bundle.

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    File URL: http://www.tandfonline.com/10.1080/13571510601097140
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    Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

    Volume (Year): 14 (2007)
    Issue (Month): 1 ()
    Pages: 59-83

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    Handle: RePEc:taf:ijecbs:v:14:y:2007:i:1:p:59-83
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