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Safe Harbors for Quantity Discounts and Bundling

11 Pages Posted: 4 Feb 2008  

Dennis W. Carlton

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Michael Waldman

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: January 2008

Abstract

The courts and analysts continue to struggle to articulate safe harbors for a wide variety of common business pricing practices in which either a single product is sold at a discount if purchased in bulk or in which multiple products are bundled together at prices different from the ones that would emerge if the products were purchased separately. The phenomenon of tying in which the sale of one product is conditioned on the purchase of another is closely related to bundling. Its analysis relies on the same economics as that used to analyze bundling (see, e.g., Carlton and Waldman (2008)), though the law seems to make a distinction between the two. The need for safe harbors for common business pricing practices arises from the recognition that these practices often are motivated by efficiency and that a broad antitrust attack on them could cause more harm than good. In this essay, we analyze and propose safe harbors for quantity discounts and bundled products. In analyzing the latter case, we discuss the deficiencies of the particular safe harbor proposed in the report of the Antitrust Modernization Commission (2007) (AMC) of which Carlton was a member.

Suggested Citation

Carlton , Dennis W. and Waldman, Michael, Safe Harbors for Quantity Discounts and Bundling (January 2008). Available at SSRN: https://ssrn.com/abstract=1089202 or http://dx.doi.org/10.2139/ssrn.1089202

Dennis W. Carlton (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-322-0215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael Waldman

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-8631 (Phone)

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