Bundling and Competition for Slots
We study competition among upstream firms when each of them sells a portfolio of distinct products and the downstream has a limited number of slots (or shelf space). In this situation, we study how bundling affects competition for slots. When the downstream has k number of slots, social efficiency requires that it purchases the best k products among all upstream firms' products. We find that under bundling, the outcome is always socially efficient but under individual sale, the outcome is not necessarily efficient. Under individual sale, each upstream firm faces a trade-off between quantity and rent extraction due to the coexistence of the internal competition (i.e. competition among its own products) and the external competition (i.e. competition from other firms' products), which can create inefficiency. On the contrary, bundling removes the internal competition and the external competition among bundles makes it optimal for each upstream firm to sell only the products belonging to the best k. This unambiguous welfare-enhancing effect of bundling is novel.
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.:
- Salinger, Michael A, 1995. "A Graphical Analysis of Bundling," The Journal of Business, University of Chicago Press, vol. 68(1), pages 85-98, January.
- Yannis Bakos & Erik Brynjolfsson, 1997.
"Bundling Information Goods: Pricing, Profits and Efficiency,"
Working Paper Series
199, MIT Center for Coordination Science.
- Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
- B. Douglas Bernheim & Michael D. Whinston, .
96008, Stanford University, Department of Economics.
- Bernheim, B.D., 1992. "Exclusive Dealing," Harvard Institute of Economic Research Working Papers 1622, Harvard - Institute of Economic Research.
- B. Douglas Bernheim & Michael D. Whinston, 1996. "Exclusive Dealing," NBER Working Papers 5666, National Bureau of Economic Research, Inc.
- Kenney, Roy W & Klein, Benjamin, 2000. "How Block Booking Facilitated Self-Enforcing Film Contracts," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 427-35, October.
- Doh-Shin Jeon & Domenico Menicucci, 2003.
"Bundling electronic journals and competition among publishers,"
Economics Working Papers
678, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2005.
- Doh-Shin Jeon & Domenico Menicucci, 2006. "Bundling Electronic Journals and Competition among Publishers," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1038-1083, 09.
- domenico menicucci & doh-shin jeon, 2004. "bundling electronic journals and competition among publishers," Econometric Society 2004 Far Eastern Meetings 720, Econometric Society.
- Doh-Shin Jeon & Domenico Menicucci, 2005. "Bundling Electronic Journals and Competition among Publishers," Working Papers 270, Barcelona Graduate School of Economics.
- Shaffer, Greg, 1991. "Capturing Strategic Rent: Full-Line Forcing, Brand Discounts, Aggregate Rebates, and Maximum Resale Price Maintenance," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 557-75, September.
- Armstrong, Mark, 1999.
"Price Discrimination by a Many-Product Firm,"
Review of Economic Studies,
Wiley Blackwell, vol. 66(1), pages 151-68, January.
- Armstrong, M., 1996. "Price discrimination by a many-product firm," Discussion Paper Series In Economics And Econometrics 9628, Economics Division, School of Social Sciences, University of Southampton.
- Adam M. Brandenburger & Harborne W. Stuart, 1996. "Value-based Business Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 5-24, 03.
- Dennis W. Carlton & Michael Waldman, 2002.
"The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries,"
RAND Journal of Economics,
The RAND Corporation, vol. 33(2), pages 194-220, Summer.
- 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.
- Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," NBER Working Papers 6831, National Bureau of Economic Research, Inc.
- Armstrong, Mark & Vickers, John, 2006.
"Competitive nonlinear pricing and bundling,"
70, University Library of Munich, Germany.
- Hanssen, F Andrew, 2000. "The Block Booking of Films Reexamined," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 395-426, October.
- Crawford, Gregory S & Yurukoglu, Ali, 2011.
"The Welfare Effects of Bundling in Multichannel Television Markets,"
CEPR Discussion Papers
8370, C.E.P.R. Discussion Papers.
- Gregory S. Crawford & Ali Yurukoglu, 2012. "The Welfare Effects of Bundling in Multichannel Television Markets," American Economic Review, American Economic Association, vol. 102(2), pages 643-85, April.
- Choi, Jay Pil & Stefanadis, Christodoulos, 2001. "Tying, Investment, and the Dynamic Leverage Theory," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 52-71, Spring.
- Anindya Ghose & Vidyanand Choudhary & Tridas Mukhopadhyay & Uday Rajan, 2002. "Personalized Pricing and Quality Differentiation on the Internet," Review of Marketing Science Working Papers 2-1-1005, Berkeley Electronic Press.
- Jeon, Doh-Shin & Menicucci, Domenico, 2009.
"Bundling and Competition for Slots: Sequential Pricing,"
TSE Working Papers
09-074, Toulouse School of Economics (TSE).
- Doh-Shin Jeon & Domenico Menicucci, 2009. "Bundling and competition for slots: Sequential pricing," Economics Working Papers 1168, Department of Economics and Business, Universitat Pompeu Fabra.
- Jeon, Doh-Shin & Menicucci, Domenico, 2009. "Bundling and Competition for Slots: Sequential Pricing," IDEI Working Papers 576, Institut d'Économie Industrielle (IDEI), Toulouse.
- Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
- Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February.
When requesting a correction, please mention this item's handle: RePEc:net:wpaper:0715. 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: (Nicholas Economides)
If references are entirely missing, you can add them using this form.