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Strategic and Welfare Implications of Bundling

Author

Listed:
  • Stephen Martin

    (Institute of Economics, University of Copenhagen)

Abstract

A standard oligopoly model of bundling shows that bundling by a firm with a monopoly over one product has a strategic effect because it changes the substitution relationships between the goods among which consumers choose. Bundling in appropriate proportions is privately profitable, reduces rivals´ profits and overall welfare, and may drive rivals from the market.

Suggested Citation

  • Stephen Martin, 1998. "Strategic and Welfare Implications of Bundling," CIE Discussion Papers 1998-14, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    • Handle: RePEc:kud:kuieci:1998-14
    as

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    File URL: http://www.econ.ku.dk/cie/dp/dp_1997-1999/1998-14.pdf/
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    References listed on IDEAS

    as
    1. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages 211-230, January.
    2. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    3. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
    4. Margaret E. Slade, 1998. "The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising," Southern Economic Journal, Southern Economic Association, vol. 65(2), pages 204-222, October.
    5. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 475-498.
    6. Slade, M. E., 1995. "The Leverage Theory of Tying Revisited," G.R.E.Q.A.M. 97b02, Universite Aix-Marseille III.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • 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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