The role of bundling in price competition

Chun Hsiung Liao, Yair Tauman

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

We focus on price competition between several multiproduct firms which produce differentiated systems, each consisting of two complementary products. Firms offer their products separately and/or as a bundle. Consumers are homogeneous but assign different values to different systems. We find that equilibrium always exists (unlike the case where bundling strategies are excluded), and consumers purchase socially best systems. Consumers extract the entire surplus unless a firm produces at least one of the components of every socially best system. We show that bundling may increase consumer surplus. A sufficient condition for a system to be sold as a bundle at a discount price is provided.

Original languageEnglish
Pages (from-to)365-389
Number of pages25
JournalInternational Journal of Industrial Organization
Volume20
Issue number3
Publication statusPublished - 2002 Mar 1

All Science Journal Classification (ASJC) codes

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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