Dominance and Competitive Bundling
We study bundling by a dominant multi-product rm facing competition from a rival multi-product rm. Compared to competition under independent pricing, competition under pure bundling reduces (increases) each rm's pro t for low (high) levels of dominance, while for intermediate levels of dominance, it increases the dominant rm's pro t but reduces the rival's pro t. The latter result provides a justi cation for the use of contractual bundling to build entry barrier. When we allow for mixed bundling, we nd a threshold level of dominance above which the unique outcome is the one under pure bundling.
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