Upstream bundling and leverage of market power

Alexandre De Cornière and Greg Taylor
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Alexandre De Cornière: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We present a novel rationale for bundling in vertical relations. In many markets, upstream firms compete to be in the best downstream slots (e.g., the best shelf in a retail store or the default application on a platform). If a multi-product upstream firm faces competition for a subset of its products, we show that tying the monopolised product with the competitive ones can reduce upstream rivals' willingness to offer slotting fees to retailers. This strategy does not rely on entry deterrence and can be achieved through contractual or even virtual tying. The model is particularly relevant to the Google-Android case.

Date: 2021-11
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Published in The Economic Journal, 2021, 131 (640), pp.3122-3144. ⟨10.1093/ej/ueab024⟩

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Related works:
Journal Article: Upstream Bundling and Leverage of Market Power (2021)
Working Paper: Upstream Bundling and Leverage of Market Power (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03524443

DOI: 10.1093/ej/ueab024

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