Bundling and Foreclosure
We examine a two-sector model characterized by monopoly provision in market 1 and perfect competition in market 2. We follow the set up in Martin (1999), but we consider the case where goods 1 and 2 can be either substitutes or complements. With this framework, we analyse the profit sacrifice required if the monopolist offers a bundle consisting of one unit of good 1 and k units of good 2 to foreclose the competitive sector. Our results show that foreclosing rivals via bundling is less costly when products are complements rather than substitutes.
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- Stephen Martin, 1998.
"Strategic and Welfare Implications of Bundling,"
CIE Discussion Papers
1998-14, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
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