Capping Bundle Discounts: Two Regulatory Rationales

Martin Byford and Stephen King

Journal of Industrial Economics, 2021, vol. 69, issue 2, 270-304

Abstract: Mixed‐bundling of groceries and gasoline is common, but it raises ‘predatory’ concerns. This paper extends the standard Hotelling approach to consider bundled discounts when two conglomerates and an independent gasoline retailer compete. We show that bundling may result in exit and analyze the effects of capping discounts—a regulatory solution adopted in Australia. The optimal cap depends on the regulator’s objective and the potential for exit. When unregulated discounting leads to exit, an intermediate cap maximises consumer surplus. A cap also ensures that no consumer is worse off with the discounts, an outcome that does not occur with unregulated discounts.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/joie.12251

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:69:y:2021:i:2:p:270-304

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0022-1821

Access Statistics for this article

Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

More articles in Journal of Industrial Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().