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The Strategic Effect of Bundling: A New Perspective

Andrea Mantovani

University of Bologna

June 7, 2010

This paper investigates the strategic effect of bundling when a multi-product firm producing two complements faces competition in both markets. I consider a demand structure where both Cournot and Bertrand competition can be evaluated. Bundling is completely ineffective when firms compete in quantities. On the contrary, under Bertrand competition, selling the two goods in a package is profitable when the goods produced by the rivals are perceived as close substitutes to those produced by the multi-product firm. Bundling drives prices up, and not only consumer surplus, but also social welfare shrinks, thus calling for the intervention of the antitrust agency.

Number of Pages in PDF File: 34

Keywords: Bundling, Oligopoly, Bertrand competition, Social Welfare

JEL Classification: D43, L13, L41

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Date posted: September 24, 2010  

Suggested Citation

Mantovani, Andrea, The Strategic Effect of Bundling: A New Perspective (June 7, 2010). Available at SSRN: http://ssrn.com/abstract=1681485 or http://dx.doi.org/10.2139/ssrn.1681485

Contact Information

Andrea Mantovani (Contact Author)
University of Bologna ( email )
Piazza Scaravilli 2
Bologna, 40126
Feedback to SSRN

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References:  29
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