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

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  • R. Glenn Hubbard
  • Atanu Saha
  • Jungmin Lee

Abstract

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.

Suggested Citation

  • R. Glenn Hubbard & Atanu Saha & Jungmin Lee, 2007. "To Bundle or Not to Bundle: Firms' Choices under Pure Bundling," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(1), pages 59-83.
  • Handle: RePEc:taf:ijecbs:v:14:y:2007:i:1:p:59-83 DOI: 10.1080/13571510601097140
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    References listed on IDEAS

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    Cited by:

    1. Chakravarty, A. & Mild, A. & Taudes, A., 2013. "Bundling decisions in supply chains," European Journal of Operational Research, Elsevier, vol. 231(3), pages 617-630.
    2. Sheikhzadeh, Mehdi & Elahi, Ehsan, 2013. "Product bundling: Impacts of product heterogeneity and risk considerations," International Journal of Production Economics, Elsevier, vol. 144(1), pages 209-222.

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    Keywords

    Pure Bundling; Monopoly; Duopoly; Entry Costs;

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