Bundled discounts: Strategic substitutes or complements?

Duarte Brito and Helder Vasconcelos

Economics Letters, 2014, vol. 124, issue 2, 278-282

Abstract: Bundled discounts by pairs of otherwise independent firms play an increasingly important role as a strategic tool in several industries. Given that prices of firms competing for the same consumers are strategic complements, one would expect their discounts levels also to be strategic complements. However, in this paper we show that under some circumstances bundled discounts may be strategic substitutes. This occurs under vertically differentiated products where a low quality pair of producers may indeed prefer to lower its discount after an increase in the discount offered by a high quality pair of producers.

Keywords: Bundled discounts; Bilateral bundling; Strategic substitutes (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:124:y:2014:i:2:p:278-282

DOI: 10.1016/j.econlet.2014.05.031

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