Yongmin Chen () and
MPRA Paper from University Library of Munich, Germany
When procuring multiple products from competing firms, a buyer may choose separate purchase, pure bundling, or mixed bundling. We show that pure bundling will generate higher buyer surplus than both separate purchase and mixed bundling, provided that trade for each good is likely to be efficient. Pure bundling is superior because it intensifies the competition between firms by reducing their cost asymmetry. Mixed bundling is inferior because it allows firms to coordinate to the high prices associated with separate purchase. (Pure) bundling is more likely to be selected as a procurement strategy when: (i) the products' values are higher relative to their possible costs, (ii) costs for different goods are more negatively or less positively dependent, or (iii) the cost distribution of each product is more dispersed.
Keywords: procurement; bundled procurement; separate purchase; bundling; mixed bundling (search for similar items in EconPapers)
JEL-codes: D21 D44 L24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cta, nep-mic and nep-mkt
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https://mpra.ub.uni-muenchen.de/63423/1/MPRA_paper_63423.pdf original version (application/pdf)
Journal Article: Bundled procurement (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:63423
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