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| Author: | Carbajo, J. Meza, D. de Seidmann, D. J. |
| Title: | A strategic motivation for commodity bundling. |
| Journal: | Journal of Industrial Economics
1990 : MAR, VOL. 38:3, p. 283-298 |
| Index terms: | COMMODITIES COMPETITION PRODUCTION COSTS |
| Language: | eng |
| Abstract: | The analytical literature on commodity bundling explains the practice of selling two or more differentiated products in a single package as a substitute for direct price discrimination. Papers in this tradition assume that the bundling firm has a monopoly over both goods. In contrast to this supposition, it is shown that imperfect competition creates a strategic incentive to bundle. The profitability of bundling, whether it adversely affects rival producers and whether it yields an overall efficiency gain depends inter alia on the nature of product market competition. The role of complementarity in explaining why firms bundle is also explored. Even though bundling reduces aggregate consumer surplus, it might produce a Pareto gain. |
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