Bundling and Competition for Slots
American Economic Review
vol. 102,
no. 5, August 2012
(pp. 1957-85)
Abstract
We consider competition between sellers selling multiple distinct products to a buyer having k slots. Under independent pricing, a pure strategy equilibrium often does not exist, and equilibrium in mixed strategy is never efficient. When bundling is allowed, each seller has an incentive to bundle his products, and an efficient "technology-renting" equilibrium always exists. Furthermore, in the case of digital goods or when sales below marginal cost are banned, all equilibria are efficient. Comparing the mixed-strategy equilibrium with the technology-renting equilibrium reveals that bundling often increases the buyer's surplus. Finally, we derive clear-cut policy implications.(JEL D43, D86, K21, L13, L14, L41, L82)Citation
Jeon, Doh-Shin, and Domenico Menicucci. 2012. "Bundling and Competition for Slots." American Economic Review, 102 (5): 1957-85. DOI: 10.1257/aer.102.5.1957Additional Materials
JEL Classification
- D43 Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
- D86 Economics of Contract: Theory
- K21 Antitrust Law
- L13 Oligopoly and Other Imperfect Markets
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L41 Monopolization; Horizontal Anticompetitive Practices
- L82 Entertainment; Media