Economics at your fingertips  

Compatibility and bundling of stand and No stand-alone use complements

Adriana Vamosiu

International Journal of Production Economics, 2018, vol. 201, issue C, 62-74

Abstract: This study analyzes the profitability of compatibility and bundling for a duopolist introducing a new, monopoly complementary product of no individual use. In a market where there are both new consumers and legacies, I show the two-product seller's optimal product bundling strategy is compatibility between the complement and the single-product competitor's platform. Their optimal price bundling strategy is to offer the two products a la carte. If compatibility is not possible due to high costs, the two-product seller's profit maximizing strategy is dependent on (i) the relative size of its legacy base to the single-product seller's, (ii) the degree of differentiation between the competing products and (ii) the consumer valuation for the new product relative to the existing one.

Keywords: Compatibility; Price bundling; Product bundling; Competition; Legacy consumers (search for similar items in EconPapers)
JEL-codes: L15 L13 D43 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

International Journal of Production Economics is currently edited by R. W. Grubbström

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-08-04
Handle: RePEc:eee:proeco:v:201:y:2018:i:c:p:62-74