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On bundling and entry deterrence

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  • Andrea Greppi
  • Domenico Menicucci

Abstract

A multiproduct dominant firm faces the threat of entry from another multiproduct firm or from single-product firms. We inquire whether the possibility of bundling by the dominant firm is more effective in deterring entry in one setting or the other. We extend the analysis of a model in Hurkens et al. (2018) to explore how the dominance level affects the comparison. For instance, for intermediate dominance levels an integrated firm is more vulnerable to bundling than separate firms, but bundling is a credible action for the dominant firm more often when it faces separate rivals than an integrated rival.

Suggested Citation

  • Andrea Greppi & Domenico Menicucci, 2018. "On bundling and entry deterrence," Working Papers - Economics wp2018_26.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2018_26.rdf
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    References listed on IDEAS

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    1. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    2. Sjaak Hurkens & Doh-Shin Jeon & Domenico Menicucci, 2019. "Dominance and Competitive Bundling," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 1-33, August.
    3. Jay Pil Choi, 2008. "Mergers With Bundling In Complementary Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 553-577, September.
    4. Dennis W. Carlton & Michael Waldman, 2002. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 194-220, Summer.
    5. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 159-187.
    6. Barry Nalebuff, 2000. "Competing Against Bundles," Yale School of Management Working Papers ysm157, Yale School of Management.
    7. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
    8. Choi, Jay Pil & Stefanadis, Christodoulos, 2001. "Tying, Investment, and the Dynamic Leverage Theory," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 52-71, Spring.
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    More about this item

    Keywords

    Competitive Bundling; Entry deterrence.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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