Competitive mixed bundling of vertically differentiated products

Illtae Ahn () and Kiho Yoon
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Illtae Ahn: Department of Economics, Chung-Ang University, Seoul, Republic of Korea

No 1101, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: We examine mixed bundling in a competitive environment that incorporates vertical product differentiation. We show that, compared to the equilibrium without bundling, (i) prices, profits and social welfare are lower, whereas (ii) consumer surplus is higher in the equilibrium with mixed bundling. In addition, the population of consumers who purchase both products from the same firm is larger in the equilibrium with mixed bundling. Further, when the quality gap between brands narrows under no bundling and symmetric mixed bundling, prices and profits decrease but social welfare and consumer surplus increase. When quality differentiation is asymmetric across products, however, complicated effects occur on prices and profits due to strategic interdependence that mixed bundling creates.

Keywords: mixed bundling; vertical differentiation; quality advantage; competitive bundling (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
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http://econ.korea.ac.kr/~ri/WorkingPapers/w1101.pdf (application/pdf)

Related works:
Journal Article: Competitive Mixed Bundling of Vertically Differentiated Products (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:iek:wpaper:1101

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