Bundling and competition for slots: Sequential pricing

Doh-Shin Jeon and Domenico Menicucci

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper we study, as in Jeon-Menicucci (2009), competition between sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. This paper considers sequential pricing and complements our main paper (Jeon- Menicucci, 2009) that considers simultaneous pricing. First, Jeon-Menicucci (2009) find that under simultaneous individual pricing, equilibrium often does not exist and hence the outcome is often inefficient. By contrast, equilibrium always exists under sequential individual pricing and we characterize it in this paper. We find that each seller faces a trade-off between the number of slots he occupies and surplus extraction per product, and there is no particular reason that this leads to an efficient allocation of slots. Second, Jeon-Menicucci (2009) find that when bundling is allowed, there always exists an efficient equilibrium but inefficient equilibria can also exist due to pure bundling (for physical products) or slotting contracts. Under sequential pricing, we find that all equilibria are efficient regardless of whether firms can use slotting contracts, and both for digital goods and for physical goods. Therefore, sequential pricing presents an even stronger case for laissez-faire in the matter of bundling than simultaneous pricing.

Keywords: Bundling; Portfolios; Slots (or Shelf Space); Pure Bundling; Slotting Contracts (search for similar items in EconPapers)
JEL-codes: D4 K21 L13 L41 L82 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Bundling and Competition for Slots: Sequential Pricing (2009)
Working Paper: Bundling and Competition for Slots: Sequential Pricing (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1168

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