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Bundling and competition for slots: Sequential pricing

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  • Doh-Shin Jeon
  • Domenico Menicucci

Abstract

In this paper we study, as in Jeon-Menicucci (2009), competition between sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. This paper considers sequential pricing and complements our main paper (Jeon- Menicucci, 2009) that considers simultaneous pricing. First, Jeon-Menicucci (2009) find that under simultaneous individual pricing, equilibrium often does not exist and hence the outcome is often inefficient. By contrast, equilibrium always exists under sequential individual pricing and we characterize it in this paper. We find that each seller faces a trade-off between the number of slots he occupies and surplus extraction per product, and there is no particular reason that this leads to an efficient allocation of slots. Second, Jeon-Menicucci (2009) find that when bundling is allowed, there always exists an efficient equilibrium but inefficient equilibria can also exist due to pure bundling (for physical products) or slotting contracts. Under sequential pricing, we find that all equilibria are efficient regardless of whether firms can use slotting contracts, and both for digital goods and for physical goods. Therefore, sequential pricing presents an even stronger case for laissez-faire in the matter of bundling than simultaneous pricing.

Suggested Citation

  • 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.
  • Handle: RePEc:upf:upfgen:1168
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    References listed on IDEAS

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    Cited by:

    1. Doh-Shin Jeon & Domenico Menicucci, 2012. "Bundling and Competition for Slots," American Economic Review, American Economic Association, vol. 102(5), pages 1957-1985, August.
    2. Jeon, Doh-Shin & Menicucci, Domenico, 2009. "Bundling and Competition for Slots: On the Portfolio Effects of Bundling," IDEI Working Papers 574, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2011.

    More about this item

    Keywords

    Bundling; Portfolios; Slots (or Shelf Space); Pure Bundling; Slotting Contracts;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • 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
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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