The Impact of Product Differentiation on Retail Bundling in a Vertical Market

Angelika Endres-Fröhlich (), Burkhard Hehenkamp and Joachim Heinzel ()
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Angelika Endres-Fröhlich: Paderborn University
Joachim Heinzel: Paderborn University

No 91, Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics

Abstract: We study the effects of product differentiation on the bundling incentives of a two-product retailer. Two monopolistic manufacturers each produce a differentiated good. One sells it to both retailers, while the other only supplies a single retailer. Retailers compete in prices. Retail bundling is profitable when the goods are close substitutes. Only then is competition so intense that the retailer uses bundling to relax competition both within and across product markets, despite an aggravation of the double marginalization problem. Our asymmetric market structure arises endogenously for the case of close substitutes. In this case, bundling reduces social welfare.

Keywords: retail bundling; upstream market power; double marginalization; product differentiation (search for similar items in EconPapers)
JEL-codes: D43 L13 L42 (search for similar items in EconPapers)
Pages: 43
Date: 2022-04
New Economics Papers: this item is included in nep-com, nep-ind, nep-ore and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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