A more general theory of commodity bundling

Mark Armstrong

MPRA Paper from University Library of Munich, Germany

Abstract: This paper extends the standard model of bundling as a price discrimination device to allow products to be substitutes and for products to be supplied by separate sellers. Whether integrated or separate, firms have an incentive to introduce a bundling discount when demand for the bundle is elastic relative to demand for stand-alone products. Product substitutability typically gives an integrated firm a greater incentive to offer a bundle discount (relative to the model with additive preferences), while substitutability is often the sole reason why separate sellers wish to offer inter-firm discounts. When separate sellers coordinate on an inter-firm discount, they can use the discount to overturn product substitutability and relax competition.

Keywords: Price discrimination; bundling; oligopoly (search for similar items in EconPapers)
JEL-codes: D4 D82 L13 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://mpra.ub.uni-muenchen.de/37375/1/MPRA_paper_37375.pdf original version (application/pdf)

Related works:
Journal Article: A more general theory of commodity bundling (2013)
Working Paper: A More General Theory of Commodity Bundling (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:37375

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