[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ivi/wpasad/2008-04.html
   My bibliography  Save this paper

Is Bundling Anticompetitive?

Author

Listed:
  • Ioana Chioveanu

    (Universidad de Alicante)

Abstract
I analyze the implications of bundling on price competition in a market with complementary products. Using a model of imperfect competition with product differentiation, I identify the incentives to bundle for two types of demand functions and study how they change with the size of the bundle. With an inelastic demand, bundling creates an advantage over uncoordinated rivals who cannot improve by bundling. I show that this no longer holds with an elastic demand. The incentives to bundle are stronger and the market outcome is symmetric bundling, the most competitive one. Profits are lowest and consumer surplus is maximized.

Suggested Citation

  • Ioana Chioveanu, 2008. "Is Bundling Anticompetitive?," Working Papers. Serie AD 2008-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2008-04
    as

    Download full text from publisher

    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2008-04.pdf
    File Function: Fisrt version / Primera version, 2008
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
    2. Barry Nalebuff, 2000. "Competing Against Bundles," Yale School of Management Working Papers ysm157, Yale School of Management.
    3. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    4. Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 37-54, March.
    5. ANDERSON, Simon P. & de PALMA, André & THISSE, Jacques-François, 1992. "Interpretations of the logit discrete choice models and the theory of product differentiation," LIDAM Reprints CORE 1017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 371-383.
    7. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, April.
    8. Yannis Bakos & Erik Brynjolfsson, 2000. "Bundling and Competition on the Internet," Marketing Science, INFORMS, vol. 19(1), pages 63-82, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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).
    2. Akifumi Ishihara & Noriyuki Yanagawa, 2013. "Dark Sides of Patent Pools with Compulsory Independent Licensing," CARF F-Series CARF-F-318, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    3. Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 25-43, February.
    4. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    5. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    6. Gastón Llanes & Andrea Mantovani & Francisco Ruiz-Aliseda, 2019. "Entry into Complementary Good Markets with Network Effects," Strategy Science, INFORMS, vol. 4(4), pages 262-282, December.
    7. Mark Armstrong, 2016. "Nonlinear Pricing," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 583-614, October.
    8. Sreya Kolay, 2018. "Tie-in contracts with downstream competition," Quantitative Marketing and Economics (QME), Springer, vol. 16(1), pages 43-77, March.
    9. Anderson, Simon P. & Loertscher, Simon & Schneider, Yves, 2010. "The ABC of complementary products mergers," Economics Letters, Elsevier, vol. 106(3), pages 212-215, March.
    10. Ricardo Flores-Fillol & Rafael Moner-Colonques, 2011. "Endogenous Mergers of Complements with Mixed Bundling," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(3), pages 231-251, November.
    11. Zhou, Jidong, 2011. "Multiproduct search," MPRA Paper 37139, University Library of Munich, Germany.
    12. Jidong Zhou, 2017. "Competitive Bundling," Econometrica, Econometric Society, vol. 85, pages 145-172, January.
    13. Etro, Federico, 2016. "Research in economics and industrial organization," Research in Economics, Elsevier, vol. 70(4), pages 511-517.
    14. Gayer, Amit & Shy, Oz, 2016. "A welfare evaluation of tying strategies," Research in Economics, Elsevier, vol. 70(4), pages 623-637.
    15. Vithala R. Rao & Gary J. Russell & Hemant Bhargava & Alan Cooke & Tim Derdenger & Hwang Kim & Nanda Kumar & Irwin Levin & Yu Ma & Nitin Mehta & John Pracejus & R. Venkatesh, 2018. "Emerging Trends in Product Bundling: Investigating Consumer Choice and Firm Behavior," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 5(1), pages 107-120, March.
    16. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    17. Kopczewski, Tomasz & Sobolewski, Maciej & Miernik, Ireneusz, 2018. "Bundling or unbundling? Integrated simulation model of optimal pricing strategies," International Journal of Production Economics, Elsevier, vol. 204(C), pages 328-345.
    18. Nicholas Economides, 1993. "Mixed Bundling in Duopoly," Working Papers 93-29, New York University, Leonard N. Stern School of Business, Department of Economics.
    19. 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.
    20. 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.

    More about this item

    Keywords

    Bundling; complementary goods; product differentiation;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2008-04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Departamento de Edición (email available below). General contact details of provider: https://edirc.repec.org/data/ievages.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.