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Dominance and Competitive Bundling

Author

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  • Hurkens, Sjaak
  • Jeon, Doh-Shin
  • Menicucci, Domenico

Abstract

We study bundling by a dominant multi-product firm facing competition from a rival multi-product firm. Compared to competition under independent pricing, competition under pure bundling reduces (increases) each firm's profit for low (high) levels of dominance, while for intermediate levels of dominance, it increases the dominant firm's profit but reduces the rival's profit. The latter result provides a justification for the use of contractual bundling to build entry barrier. When we allow for mixed bundling, we find a threshold level of dominance above which the unique outcome is the one under pure bundling.

Suggested Citation

  • Hurkens, Sjaak & Jeon, Doh-Shin & Menicucci, Domenico, 2013. "Dominance and Competitive Bundling," IDEI Working Papers 790, Institut d'Économie Industrielle (IDEI), Toulouse, revised May 2018.
  • Handle: RePEc:ide:wpaper:27442
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    Cited by:

    1. Etro, Federico, 2019. "Mergers of complements and entry in innovative industries," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 302-326.
    2. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, December.
    3. Andrea Greppi & Domenico Menicucci, 2021. "On Bundling and Entry Deterrence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(4), pages 561-581, June.
    4. Angelika Endres-Fröhlich & Joachim Heinzel, 2022. "The Impact of Product Qualities on Downstream Bundling in a Distribution Channel," Working Papers Dissertations 90, Paderborn University, Faculty of Business Administration and Economics.
    5. Sang‐Hyun Kim & Jong‐Hee Hahn, 2022. "On the profitability of interfirm bundling in oligopolies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 657-673, August.
    6. Sarat Kumar Jena & Abhijeet Ghadge, 2022. "Product bundling and advertising strategy for a duopoly supply chain: a power-balance perspective," Annals of Operations Research, Springer, vol. 315(2), pages 1729-1753, August.
    7. Zhou, Jidong, 2021. "Mixed bundling in oligopoly markets," Journal of Economic Theory, Elsevier, vol. 194(C).
    8. Gregory S. Crawford, 2015. "The economics of television and online video markets," ECON - Working Papers 197, Department of Economics - University of Zurich.
    9. Kuroda, Toshifumi & Ida, Takanori & Koguchi, Teppei, 2015. "The impact of asymmetric regulation on product bundling: The case of fixed broadband and mobile communications in Japan," 2015 Regional ITS Conference, Los Angeles 2015 146318, International Telecommunications Society (ITS).
    10. Joao Macieira & Pedro Pereira & Joao Vareda, 2013. "Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play," Working Papers 13-15, NET Institute.
    11. Shuai, Jie & Yang, Huanxing & Zhang, Lan, 2022. "Dominant firm and competitive bundling in oligopoly markets," Games and Economic Behavior, Elsevier, vol. 132(C), pages 421-447.
    12. Cuntz, Alexander & Bergquist, Kyle, 2022. "Exclusive content and platform competition in Latin America," Information Economics and Policy, Elsevier, vol. 60(C).
    13. Jidong Zhou, 2017. "Competitive Bundling," Econometrica, Econometric Society, vol. 85, pages 145-172, January.
    14. Innocenti, Federico & Menicucci, Domenico, 2021. "Partial compatibility in oligopoly," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 351-378.
    15. Michael G Jacobides & Ioannis Lianos, 2021. "Ecosystems and competition law in theory and practice [Ecosystem as structure: an actionable construct for strategy]," Industrial and Corporate Change, Oxford University Press, vol. 30(5), pages 1199-1229.
    16. Angelika Endres-Fröhlich & Burkhard Hehenkamp & Joachim Heinzel, 2022. "The Impact of Product Differentiation on Retail Bundling in a Vertical Market," Working Papers Dissertations 91, Paderborn University, Faculty of Business Administration and Economics.
    17. Crawford, Gregory S., 2015. "The Economics of Television and Online Video Markets," CEPR Discussion Papers 10676, C.E.P.R. Discussion Papers.
    18. Doh-Shin Jeon & Domenico Menicucci & Nikrooz Nasr, 2015. "Dynamics of Compatibility under Switching Costs," Working Papers 15-17, NET Institute, revised Oct 2015.

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    More about this item

    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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