The Strategic Effect of Bundling: A New Perspective

Andrea Mantovani

Review of Industrial Organization, 2013, vol. 42, issue 1, 25-43

Abstract: This paper investigates the strategic effect of the bundling strategy that is adopted by a multi-product firm that produces two complementary goods and faces one single-product rival in each market. I consider both the Cournot and Bertrand cases. When firms compete in quantities, bundling is completely ineffective. Under price competition, selling as a package is profitable when market competition is particularly tough. In such circumstances, the multi-product firm resorts to bundling to dampen the negative impact of low brand differentiation and/or scarce product complementarity. However, overall prices increase as a result of bundling, and not only consumer surplus, but also total social welfare, shrink. Copyright Springer Science+Business Media New York 2013

Keywords: Bundling; Strategic effect; Cournot and Bertrand competition (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Working Paper: The strategic effect of bundling: a new perspective (2010)
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DOI: 10.1007/s11151-012-9361-9

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