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Upstream Bundling and Leverage of Market Power

Alexandre de Cornière and Greg Taylor ()

No 13083, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Motivated by the recent Google-Android antitrust case, we present a novel rationale for bundling by a multiproduct upstream firm. Consider a market where downstream firms procure components from upstream suppliers. U1 is the only supplier of component A, but faces competition for component B. Suppose that component A increases demand for the downstream product and that contractual frictions induce positive wholesale markups. By bundling A and B, U1 reduces its B-rivals' willingness to offer slotting fees to the downstream firm, thereby allowing U1 to capture more of the industry profit. Bundling harms the downstream firm and the B rivals, and can be anticompetitive.

Keywords: Bundling; Exclusion; Vertical Relations (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta and nep-ind
Date: 2018-07
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