Output commitment through product bundling: Experimental evidence

Jeroen Hinloopen, Wieland Müller and Hans-Theo Normann

No 116, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We analyze the impact of product bundling in experimental markets. One firm has monopoly power in a first market but competes with another firm à la Cournot in a second market. We compare treatments where the multi-product firm (i) always bundles, (ii) never bundles, and (iii) chooses whether to bundle. We also contrast the simultaneous and the sequential order of moves in the duopoly market. Our data indicate support for the theory of product bundling: with bundling and simultaneous moves, the multi-product firm offers the predicted number of units. When the multi-product firm is the Stackelberg leader, the predicted equilibrium is better attained with bundling, especially when it chooses to bundle, even though 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.

Keywords: product bundling; commitment; Cournot; experiments; Stackelberg (search for similar items in EconPapers)
JEL-codes: C92 D43 L11 L12 L41 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com and nep-exp
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Related works:
Journal Article: Output commitment through product bundling: Experimental evidence (2014)
Working Paper: Output Commitment through Product Bundling: Experimental Evidence (2013)
Working Paper: Output Commitment through Product Bundling: Experimental Evidence (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:116

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