An Analysis of Bundle Pricing: The Case of the Corn Seed Market

Guanming Shi, Jean-Paul Chavas () and Kyle Stiegert
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Guanming Shi: U of Wisconsin
Kyle Stiegert: U of Wisconsin

Staff Paper Series from University of Wisconsin, Agricultural and Applied Economics

Abstract: The paper investigates bundle pricing under imperfect competition. In a multiproduct context, the substitution/complementarity relationships among products can affect pricing in complex ways. This is used to motivate multi-product generalizations of the Herfindahl-Hirschmann index, which capture cross-market effects of imperfect competition on bundle pricing. Applied to the US corn seed market, the analysis investigates the pricing of conventional seeds and patented biotech seeds. For bundled biotech seeds, it finds strong evidence of sub-additive bundle pricing, thus rejecting standard component pricing. The econometric results document how increases in traditional and cross-market measures of imperfect competition contribute to higher seed prices.

Date: 2008-09
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Persistent link: http://EconPapers.repec.org/RePEc:ecl:wisagr:529

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