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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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  1. domenico menicucci & doh-shin jeon, 2004. "bundling electronic journals and competition among publishers," Econometric Society 2004 Far Eastern Meetings 720, Econometric Society.
  2. Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
  3. Gregory Pavlov, 2010. "Optimal Mechanism for Selling Two Goods," UWO Department of Economics Working Papers 20103, University of Western Ontario, Department of Economics.
  4. Doh-Shin Jeon & Domenico Menicucci, 2012. "Bundling and Competition for Slots," American Economic Review, American Economic Association, vol. 102(5), pages 1957-85, August.
  5. John Thanassoulis, 2011. "Is Multimedia Convergence To Be Welcomed?," Journal of Industrial Economics, Wiley Blackwell, vol. 59(2), pages 225-253, 06.
  6. Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use Of Tying To Preserve And Create Market Power In Evolving Industries," University of Chicago - George G. Stigler Center for Study of Economy and State 145, Chicago - Center for Study of Economy and State.
  7. Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 283-98, March.
  8. Kai Uwe Kuhn & John Van Reenen, 2008. "Interoperability and market foreclosure in the European Microsoft case," LSE Research Online Documents on Economics 4664, London School of Economics and Political Science, LSE Library.
  9. Jong-Hee Hahn & Sang-Hyun Kim, 2012. "Mix-and-Match Compatibility in Asymmetric System Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 311-338, June.
  10. Dennis W. Carlton & Joshua S. Gans & Michael Waldman, 2007. "Why Tie A Product Consumers Do Not Use?," NBER Working Papers 13339, National Bureau of Economic Research, Inc.
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