Mixed Bundling Strategies And Multiproduct Price Competition
This paper deals with price competition among multiproduct firms. We consider a model with n firms and one representative buyer. Each firm produces a set of products that can be different or identical to the other firms' products. The buyer is characterized by her willingness to pay -in monetary terms- for every subset of products. To handle the combinatorial complexity of this general setting we use the linear relaxation of an integer programming package assignment problem. This approach allows to characterize all the equilibrium outcomes. We look for subgame perfect Nash equilibrium prices in mixed bundling strategies, i.e., when firms offer consumers the option of buying goods separately or else packages of them at a discount over the single good prices. We find that a mixed bundling subgame perfect Nash equilibrium price vector always exists. Also, the associated equilibrium outcome is always efficient, in the sense that it maximizes the social surplus. We extend the analysis to a model with m buyers and offer the conditions under which the equilibrium outcome set is non-empty.
|Date of creation:||Jan 2004|
|Date of revision:|
|Publication status:||Published by Ivie|
|Contact details of provider:|| Postal: C/ Guardia Civil, 22, Esc 2a, 1o, E-46020 VALENCIA|
Phone: +34 96 319 00 50
Fax: +34 96 319 00 55
Web page: http://www.ivie.es/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January.
- Amparo Urbano Salvador & Junichi Watanabe & Yair Tauman, 1996.
"A model of multiproduct price competition,"
Working Papers. Serie AD
1996-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
- Bikhchandani, Sushil & Ostroy, Joseph M., 2002. "The Package Assignment Model," Journal of Economic Theory, Elsevier, vol. 107(2), pages 377-406, December.
- Bikhchandani, Sushil & Mamer, John W., 1997. "Competitive Equilibrium in an Exchange Economy with Indivisibilities," Journal of Economic Theory, Elsevier, vol. 74(2), pages 385-413, June.
- Arribas, Ivan & Urbano, Amparo, 2005.
"Nash equilibria in a model of multiproduct price competition: an assignment problem,"
Journal of Mathematical Economics,
Elsevier, vol. 41(3), pages 351-385, April.
- Ivan Arribas & Amparo Urbano, 2003. "Nash Equilibria In A Model Of Multiproduct Price Competition: An Assignment Problem," Working Papers. Serie AD 2003-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- David S. Sibley & Padmanabhan Srinagesh, 1997. "Multiproduct Nonlinear Pricing with Multiple Taste Characteristics," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 684-707, Winter.
- Anderson, Simon P. & Leruth, Luc, 1993. "Why firms may prefer not to price discriminate via mixed bundling," International Journal of Industrial Organization, Elsevier, vol. 11(1), pages 49-61, March.
- Gul, Faruk & Stacchetti, Ennio, 1999. "Walrasian Equilibrium with Gross Substitutes," Journal of Economic Theory, Elsevier, vol. 87(1), pages 95-124, July.
- Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November.
- Liao, Chun-Hsiung & Urbano, Amparo, 2002. "Pure Component Pricing in a Duopoly," Manchester School, University of Manchester, vol. 70(1), pages 150-63, January.
- R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
- Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2004-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición)
If references are entirely missing, you can add them using this form.