Bundling and joint marketing by rival firms
We study joint marketing arrangements by competing firms who engage in price discrimination between consumers who patronize only one firm (single purchasing) and those who purchase from both competitors (bundle purchasers). Two types of joint marketing are considered. Firms either commit to a component-price that applies to bundle-purchasers and then firms set stand-alone prices for single purchasers; or firms commit to a rebate off their stand alone price that will be applied to bundle-purchasers, and then firms set their stand alone prices. Both methods allow firms to raise prices and earn higher profits. However, the effect of price discrimination on social welfare depends on how prices are chosen. The rebate joint marketing scheme increases joint purchasing, whereas bundle pricing diminishes bundle purchases. If the marginal social value of a bundle over a single purchase is large, the former increases total welfare. However, welfare can also increase with bundle pricing compared to non-discriminatory pricing.
|Date of creation:||2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 211 81-15494
Fax: +49 211 81-15499
Web page: http://www.dice.hhu.de/en.html
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.:
- Leonard K. Cheng & Jae Nahm, 2007. "Product boundary, vertical competition, and the double mark-upproblem," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 447-466, 06.
- Joshua S. Gans & Stephen P. King, 2006. "PAYING FOR LOYALTY: PRODUCT BUNDLING IN OLIGOPOLY -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 43-62, 03.
- Jeitschko Thomas D. & Zhang Nanyun, 2014.
"Adverse Effects of Patent Pooling on Product Development and Commercialization,"
The B.E. Journal of Theoretical Economics,
De Gruyter, vol. 14(1), pages 31, January.
- Jeitschko, Thomas D. & Zhang, Nanyun, 2013. "Adverse effects of patent pooling on product development and commercialization," DICE Discussion Papers 92, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Thomas D. Jeitschko & Nanyun Zhang, 2012. "Adverse Effects of Patent Pooling on Product Development and Commercialization," EAG Discussions Papers 201205, Department of Justice, Antitrust Division.
- Caminal, Ramon & Matutes, Carmen, 1990. "Endogenous switching costs in a duopoly model," International Journal of Industrial Organization, Elsevier, vol. 8(3), pages 353-373, September.
- Rey, Patrick & Tirole, Jean, 2013.
"Cooperation vs. Collusion: How Essentiality Shapes Co-opetition,"
TSE Working Papers
13-439, Toulouse School of Economics (TSE).
- Rey, Patrick & Tirole, Jean, 2013. "Cooperation vs. Collusion: How Essentiality Shapes Co-opetition," IDEI Working Papers 801, Institut d'Économie Industrielle (IDEI), Toulouse.
- Duarte Brito & Helder Vasconcelos, 2015. "Interfirm Bundling and Vertical Product Differentiation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(1), pages 1-27, 01.
When requesting a correction, please mention this item's handle: RePEc:zbw:dicedp:144. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.