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Competing Against Bundles


  • Barry Nalebuff

    () (School of Management)


In this paper, we show that a firm that sells a bundle of complementary products will have a substantial advantage over rivals who sell the component products individually. Furthermore, this advantage increases with the size of the bundle. Once there are four or more items, the bundle seller does better than when it sells each component individually. This model helps explain one factor in how Microsoft achieved dominance in the Office software suite against pre-existing and well-established rivals in each component. This paper is a sequel to Bundling [Nalebuff (1999)].

Suggested Citation

  • Barry Nalebuff, 2000. "Competing Against Bundles," Yale School of Management Working Papers ysm157, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm157

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    References listed on IDEAS

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    Cited by:

    1. Machiel Dijk & Richard Nahuis & Daniel Waagmeester, 2006. "Does Public Service Broadcasting Serve The Public? The Future of Television in the Changing Media Landscape," De Economist, Springer, vol. 154(2), pages 251-276, June.
    2. Hal R. Varian, 2001. "High-technology industries and market structure," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 65-101.
    3. Ioana Chioveanu, 2008. "Is Bundling Anticompetitive?," Working Papers. Serie AD 2008-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Aoki, Reiko & Nagaoka, Sadao, 2004. "The Consortium Standard and Patent Pools," Economic Review, Hitotsubashi University, vol. 55(4), pages 345-357, January.
    5. Guillem Roig, 2017. "Product Compatibility as an Strategy to Hinder Entry Deterrence," DOCUMENTOS DE TRABAJO 015773, UNIVERSIDAD DEL ROSARIO.
    6. Zhou, Jidong, 2011. "Multiproduct search," MPRA Paper 37139, University Library of Munich, Germany.
    7. Oliver Budzinski & Katharina Wacker, 2007. "The Prohibition Of The Proposed Springer-Prosiebensat.1 Merger: How Much Economics In German Merger Control?," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 281-306.
    8. Paul Heidhues, 2007. "Exclusionary Bundling and the Effects of a Competitive Fringe. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 138-142, March.
    9. Rune Stenbacka, 2002. "Microeconomic Policies in the New Economy," Finnish Economic Papers, Finnish Economic Association, vol. 15(2), pages 59-75, Autumn.
    10. Keith M. Chen & Barry Nalebuff, 2006. "One-Way Essential Complements," Levine's Bibliography 321307000000000669, UCLA Department of Economics.
    11. Anil Caliskan & David Porter & Stephen Rassenti & Vernon L. Smith & Bart J. Wilson, 2007. "Exclusionary Bundling and the Effects of a Competitive Fringe," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 109-132, March.
    12. Ioana CHIOVEANU, 2002. "Is Bundling Anticompetitive?," UFAE and IAE Working Papers 568.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    13. Miller, David A., 2008. "Invention under uncertainty and the threat of ex post entry," European Economic Review, Elsevier, vol. 52(3), pages 387-412, April.
    14. Zhou, Jidong, 2015. "Competitive Bundling," MPRA Paper 68358, University Library of Munich, Germany.
    15. Srinuan, Pratompong & Srinuan, Chalita & Bohlin, Erik, 2014. "An empirical analysis of multiple services and choices of consumer in the Swedish telecommunications market," Telecommunications Policy, Elsevier, vol. 38(5), pages 449-459.
    16. Thibaud Vergé, 2003. "Portfolio Effects and Merger Control: Full-line Forcing as an Entry Deterrence Strategy," Industrial Organization 0301010, EconWPA.
    17. Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, EconWPA.
    18. Luís M. B. Cabral & Miguel Villas-Boas, 2005. "Bertrand Supertraps," Management Science, INFORMS, vol. 51(4), pages 599-613, April.
    19. Matsushima, Noriaki & Mizuno, Tomomichi, 2013. "Vertical separation as a defense against strong suppliers," European Journal of Operational Research, Elsevier, vol. 228(1), pages 208-216.
    20. Guillem Roig, 2017. "Product Compatibility as an Strategy to Hinder Entry Deterrence," DOCUMENTOS DE TRABAJO 015774, UNIVERSIDAD DEL ROSARIO.
    21. Archishman Chakraborty & Nandini Gupta & Rick Harbaugh, 2002. "Seller Cheap Talk in Common Value Auctions," Claremont Colleges Working Papers 2002-30, Claremont Colleges.
    22. Noriaki Matsushima & Tomomichi Mizuno, 2010. "How do market structures affect decisions on vertical integration/separation?," ISER Discussion Paper 0770, Institute of Social and Economic Research, Osaka University.
    23. Quintero Jaramillo, Jose E., 2004. "Liquidity constraints and credit subsidies in auctions," DEE - Working Papers. Business Economics. WB wb040604, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    24. Dennis W. Carlton & Robert H. Gertner, 2003. "Intellectual Property, Antitrust, and Strategic Behavior," NBER Chapters,in: Innovation Policy and the Economy, Volume 3, pages 29-60 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection


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