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Bundling and Economies of Scope

Communications & Strategies, Special Issue, November 2008

13 Pages Posted: 8 Apr 2009  

Antonin Arlandis

France Telecom - Research & Development

Date Written: April 7, 2009

Abstract

This paper examines how bundling and economies of scope impact competition. We model a duopoly where two firms, produce the two components of a system. We show that firms always have a unilateral incentive to target a discount to consumers who buy the two goods close to the same firm. In our model, the Nash equilibrium is one of mixed bundling. The economies of scope (created by bundling) act to reduce (increase) firms' profits when the market is completely (partially) covered. Moreover, economies of scope act to increase consumer surplus.

Keywords: Bundling, economies of scope, triple and quadruple play

JEL Classification: L11, M31

Suggested Citation

Arlandis, Antonin, Bundling and Economies of Scope (April 7, 2009). Communications & Strategies, Special Issue, November 2008. Available at SSRN: https://ssrn.com/abstract=1374389

Antonin Arlandis (Contact Author)

France Telecom - Research & Development ( email )

39-40 rue de General Leclerc
Issy-Les-Moulineaux, F-92131
France

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