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Dominance and Competitive Bundling

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

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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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 790.

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Date of creation: 13 Aug 2013
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Handle: RePEc:ide:wpaper:27442
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