Multi-product bargaining, bundling, and buyer power

Markus Dertwinkel-Kalt () and Christian Wey

Economics Letters, 2020, vol. 188, issue C

Abstract: We re-consider the bilateral bargaining problem of a multi-product, manufacturer–retailer trading relationship. O’Brien and Shaffer (2005) have shown that the unbundling of contracts leads to downward distorted production levels if seller power is strong, while otherwise the joint profit maximizing quantities are contracted (which is also always the case when bundling contracts are feasible). We show that the unbundling of contracts also leads to downward distorted output levels when the buyer firm has sufficient (Nash) bargaining power (i.e., buyer power). Our result is driven by cost substitutability (diseconomies of scope).

Keywords: Vertical restraints; Bundling; Buyer power (search for similar items in EconPapers)
JEL-codes: K21 L13 L41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:188:y:2020:i:c:s0165176519304732

DOI: 10.1016/j.econlet.2019.108936

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