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Upstream Bundling and Leverage of Market Power

Alexandre Cornière (de) and Greg Taylor ()

No 17-827, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We present a novel rationale for bundling in vertical relations. In many markets, upstream firms compete to be in the best downstream slots (e.g., the best shelf in a retail store or the default application on a platform). Bundling by a multiproduct upstream firm can soften competition for slots by reducing rivals' value for them. This strategy does not rely on entry deterrence and can be achieved through contractual or even virtual tying. We also study the effects of upstream bundling on the downstream market; by intensifying competition there, bundling can leave consumers better-off even when there is foreclosure upstream.

JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2017-07, Revised 2019-10
New Economics Papers: this item is included in nep-mkt
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Working Paper: Upstream Bundling and Leverage of Market Power (2018) Downloads
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