Output Commitment through Product Bundling: Experimental Evidence

Jeroen Hinloopen, Wieland Mueller and Hans-Theo Normann
Additional contact information
Wieland Mueller: Vienna University
Hans-Theo Normann: Heinrich-Heine University
Authors registered in the RePEc Author Service: Wieland Müller

No 11-170/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper resulted in a publication in European Economic Review (2014), 164-180.

We analyze the impact of product bundling in experimental markets. One firm has monopoly power in a first market but competes with another firm in a second market. We compare treatments where the multiproduct firm (i) always bundles, (ii) never bundles, and (iii) chooses whether or not to bundle. We also contrast the simultaneous and the sequential order of moves in the duopoly market. Our data indicate support for the theory of product bundling: with bundling and simultaneous moves, the multiproduct firm offers the predicted number of units. When the multiproduct firm is the Stackelberg leader, the predicted equilibrium is better attained with bundling, especially when it chooses to bundle, even though in theory bundling should not make a difference here. In sum, bundling works as a commitment device that enables the transfer of market power from one market to another.

Keywords: Cournot; commitment; experiments; product bundling; Stackelberg (search for similar items in EconPapers)
JEL-codes: C92 D43 L11 L12 L41 (search for similar items in EconPapers)
Date: 2011-11-28, Revised 2013-07-14
New Economics Papers: this item is included in nep-com and nep-exp
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: Output commitment through product bundling: Experimental evidence (2014)
Working Paper: Output commitment through product bundling: Experimental evidence (2013)
Working Paper: Output Commitment through Product Bundling: Experimental Evidence (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20110170

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