Bundling and Collusion in Communications Markets
29 Pages Posted: 2 Nov 2006
Date Written: November 2006
Abstract
This paper deals with competition in communications markets between an incumbent and an entrant. We analyze the effect of bundling strategy by a firm who enters an incumbent market. This market dimension has profound implications on the sustainability of collusion in an infinitely repeated game framework. We show that the bundling strategy of the entrant might hinder collusion. Futhermore, we consider a setting in which the entrant uses a one-way access that the incumbent possesses. In such situation, we show that when the entrant bundles its products, a low access charge for call termination on the incumbent network might increase the feasibility of collusion. This result has an important policy implication.
Keywords: Bindling, Collusion, Differentiation
JEL Classification: D43, L13, L9
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries
By Dennis W. Carlton and Michael Waldman
-
Innovation, Rent Extraction, and Integration in Systems Markets
By Joseph Farrell and Michael L. Katz
-
Bundling and Competition on the Internet
By Yannis Bakos and Erik Brynjolfsson
-
Vertical Foreclosure with the Choice of Input Specifications
By Jay Pil Choi and Sang-seung Yi
-
Two-Sided Network Effects: A Theory of Information Product Design
-
Tying and Innovation: A Dynamic Analysis of Tying Arrangements
By Jay Pil Choi
-
An Economist's Guide to U.S. V Microsoft
By Richard Gilbert and Michael L. Katz