American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Dominance and Competitive Bundling
American Economic Journal: Microeconomics
vol. 11,
no. 3, August 2019
(pp. 1–33)
Abstract
We study how bundling affects competition between two asymmetric multi-product firms. One firm dominates the other in that it produces better products more efficiently. For low (high) levels of dominance, bundling intensifies (relaxes) price competition and lowers (raises) both firms' profits. For intermediate dominance levels, bundling increases the dominant firm's market share substantially, thereby raising its profit while reducing its rival's profit. Hence, the threat to bundle is then a credible foreclosure strategy. We also identify circumstances in which a firm that dominates only in some markets can profitably leverage its dominance to other markets by tying all its products.Citation
Hurkens, Sjaak, Doh-Shin Jeon, and Domenico Menicucci. 2019. "Dominance and Competitive Bundling." American Economic Journal: Microeconomics, 11 (3): 1–33. DOI: 10.1257/mic.20170131Additional Materials
JEL Classification
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- K21 Antitrust Law
- L13 Oligopoly and Other Imperfect Markets
- L41 Monopolization; Horizontal Anticompetitive Practices
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