Buyer Power, Upstream Bundling, and Foreclosure

Claire Chambolle () and Hugo Molina

Working Papers from HAL

Abstract: This article provides a new rationale for the "leverage theory" of bundling in vertical markets. We analyze a framework with a capacity-constrained retailer and uncover that buyer power explains the emergence of bundling practices by a multi-product manufacturer to foreclose a more efficient upstream rival. We further show that the retailer may counteract this adverse effect by expanding its stocking capacity. Finally, we highlight that a ban on bundling practices may restore the retailer's incentives to restrict its stocking capacity which generates detrimental effects for welfare.

Keywords: vertical relations; buyer power; exclusionary bundling; slotting fees; endogenous network; antitrust policy (search for similar items in EconPapers)
Date: 2020-10-07
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02960034

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