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American Economic Review: Vol. 102 No. 5 (August 2012)

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Bundling and Competition for Slots

Article Citation

Jeon, Doh-Shin, and Domenico Menicucci. 2012. "Bundling and Competition for Slots." American Economic Review, 102(5): 1957-85.

DOI: 10.1257/aer.102.5.1957

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)

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Authors

Jeon, Doh-Shin (Toulouse School of Economics and U Toulouse I, Capitole)
Menicucci, Domenico (U Florence)

JEL Classifications

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


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