IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Ain’t it "Suite"? Bundling in the PC Office Software Market

Listed author(s):
  • Gandal, Neil
  • Markovich, Sarit
  • Riordan, Michael

Our paper examines the importance of office suites for the evolution of the PC office software market in the 1990s. We develop a discrete choice model of product differentiation that enables us to estimate correlation in consumer preferences across spreadsheets and word processors. Estimation confirms strong positive correlation of consumer values for spreadsheets and word processor products, a bonus value for suites, and an advantage for Microsoft products. We use the estimated demand model to simulate various ‘hypothetical’ market structures in order to shed light on the welfare and competitive effects of bundling in the office productivity software market. We examine the competitive effects of bundling in a simulated market setting of partial competition, in which Lotus sells only a spreadsheet and WordPerfect sells only a word processor, while Microsoft sells both components as well as a suite. Assuming the rivals remain active in the market, when the correlation is positive, the introduction of the suite is pro-competitive (i.e., beneficial for consumers) on balance. This is mainly because the suite bonus 'value' is much larger than the difference between the suite price and the sum of Microsoft’s component prices when Microsoft does not offer a suite. When there is strong positive correlation (as we find), there are many such consumers who purchase both components separately when suites are not available. All of these consumers 'switch' to the suite when it is introduced, and reap significant benefits. The simulations show that the introduction of Microsoft’s Office suite also expands the distribution of spreadsheets and word processors, and this is beneficial to consumers as well.

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.

File URL:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

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.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9181.

in new window

Date of creation: Oct 2012
Handle: RePEc:cpr:ceprdp:9181
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:

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.:

in new window

  1. Salinger, Michael A, 1995. "A Graphical Analysis of Bundling," The Journal of Business, University of Chicago Press, vol. 68(1), pages 85-98, January.
  2. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
  3. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
  4. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 159-187.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:9181. 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: ()

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.