Bundling Negotiations: An Efficiency Rationale for Multiproject Contact

Abstract:     
Using a database of all research joint ventures registered in the U.S., we document the pervasiveness of multiproject contact, defined as pairs of firms engaging in several research joint ventures together. In contrast to the anticompetitive view prevailing in the literature, we develop a model providing an
efficiency rationale for multiproject contact. Each project involves decisions which are the subject of negotiations among participants. The inefficiency associated with bargaining under asymmetric information can be mitigated if negotiations are bundled, i.e., negotiations over several projects are conducted jointly. Our analysis of the benefits of bundling negotiations is cast in terms familiar from the literature on bundling by a multiproduct monopolist.

JEL Classifications: C78, O32, L15

Working Paper Series