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Evaluating the Profitability of Product Bundling in the Context of Negotiations

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  • Esther Gal-Or

    (University of Pittsburgh)

Abstract

I develop a model to evaluate the profitability of product bundling in the context of negotiations between a monopolist and intermediaries that sell its products to consumers. I investigate whether the monopolist finds it feasible and advantageous to utilize product bundling to block negotiations between the intermediaries and a rival firm, which competes against the monopolist in a complementary market. My model demonstrates that bundling can be affected by intermediate bargaining power. Specifically, while the example I consider supports the profitability of product bundling when the monopolist sells its product directly to consumers, the existence of negotiations with intermediaries may reverse this result.

Suggested Citation

  • Esther Gal-Or, 2004. "Evaluating the Profitability of Product Bundling in the Context of Negotiations," The Journal of Business, University of Chicago Press, vol. 77(4), pages 639-674, October.
    • Handle: RePEc:ucp:jnlbus:v:77:y:2004:i:4:p:639-674
    DOI: 10.1086/422435
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    Cited by:

    1. R. Venkatesh & Pradeep Chintagunta & Vijay Mahajan, 2006. "Research Note--Sole Entrant, Co-optor, or Component Supplier: Optimal End-Product Strategies for Manufacturers of Proprietary Component Brands," Management Science, INFORMS, vol. 52(4), pages 613-622, April.
    2. Chakravarty, A. & Mild, A. & Taudes, A., 2013. "Bundling decisions in supply chains," European Journal of Operational Research, Elsevier, vol. 231(3), pages 617-630.
    3. Yan, Ruiliang & Guo, Peijun & Wang, John & Amrouche, Nawel, 2011. "Product distribution and coordination strategies in a multi-channel context," Journal of Retailing and Consumer Services, Elsevier, vol. 18(1), pages 19-26.
    4. Amrouche, Nawel & Yan, Ruiliang, 2015. "Aggressive or partnership strategy: Which choice is better for the national brand?," International Journal of Production Economics, Elsevier, vol. 166(C), pages 50-63.
    5. Yan, Ruiliang & Pei, Zhi, 2011. "Information asymmetry, pricing strategy and firm's performance in the retailer- multi-channel manufacturer supply chain," Journal of Business Research, Elsevier, vol. 64(4), pages 377-384, April.

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