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Output Commitment through Product Bundling: Experimental Evidence

Jeroen Hinloopen (), Wieland Müller and Hans-Theo Normann ()

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: We analyze the impact of product bundling in experimental markets. A firm has monopoly power in one market but faces competition by a second firm in another market. We compare treatments where the monopolist can bundle its two products to treatments where it cannot, and we contrast simultaneous and sequential order of moves. Our data indicate support for the theory of product bundling, even though substantial payoff differences between players exist. With bundling and simultaneous moves, the monopolist offers the predicted number of units. When the monopolist is the Stackelberg leader, the predicted equilibrium is better attained with bundling although in theory bundling should not make a difference here. In sum: bundling works as a commitment device that enables the transfer of market power from one market to another.

JEL-codes: C92 D43 L11 L12 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-exp and nep-gth
Date: 2011-12
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http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie1112.pdf (application/pdf)

Related works:
Journal Article: Output commitment through product bundling: Experimental evidence (2014) Downloads
Working Paper: Output Commitment through Product Bundling: Experimental Evidence (2013) Downloads
Working Paper: Output commitment through product bundling: Experimental evidence (2013) Downloads
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