Anticompetitive bundling when buyers compete

Alexandre de Cornière and Greg Taylor
Authors registered in the RePEc Author Service: Marcel Boyer

No 23-1403, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study the profitability of bundling by an upstream firm who licenses com-plementary technologies to downstream competitors, and who faces a superior competitor for one of its technologies. In an otherwise standard “Chicago-style” model, we show that the existence of downstream competition can make inefficient bundling profitable. Forcing downstream firms to use a less efficient technology can soften competition, thus allowing the upstream firm to extract more profit through the licensing of its monopolized technology. Bundling is more likely to be profitable if downstream competition is intense and if technologies are strongly complementary. The mechanism requires a public commitment to bundling (e.g. technical bundling) and the unobservability of the contracts offered to downstream firms. A similar logic can make it profitable for the upstream firm to degrade the interoperability between its technologies and those of its rivals, even without foreclosing competition.

Date: 2023-01-31
New Economics Papers: this item is included in nep-com and nep-reg
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Related works:
Journal Article: Anticompetitive Bundling When Buyers Compete (2024)
Working Paper: Anticompetitive bundling when buyers compete (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:127083

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