Bundling and Competition for Slots
Doh-Shin Jeon, Domenico Menicucci
American Economic Review · 2012 · Volume 102 · Issue 5
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)
Keywords
Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection, Economics of Contract: Theory, Antitrust Law, Oligopoly and Other Imperfect Markets, Transactional Relationships, Contracts and Reputation, Networks, Monopolization, Horizontal Anticompetitive Practices, Entertainment, Media
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