Bundling and Competition for Slots: Sequential Pricing

38 Pages Posted: 13 Oct 2009

See all articles by Doh-Shin Jeon

Doh-Shin Jeon

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Domenico Menicucci

Universita' degli Studi di Firenze

Date Written: August 8, 2009

Abstract

In this paper we study, as in Jeon-Menicucci (2009), competition between sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. This paper considers sequential pricing and complements our main paper (Jeon- Menicucci, 2009) that considers simultaneous pricing. First, Jeon-Menicucci (2009) find that under simultaneous individual pricing, equilibrium often does not exist and hence the outcome is often inefficient. By contrast, equilibrium always exists under sequential individual pricing and we characterize it in this paper. We find that each seller faces a trade-off between the number of slots he occupies and surplus extraction per product, and there is no particular reason that this leads to an efficient allocation of slots. Second, Jeon-Menicucci (2009) find that when bundling is allowed, there always exists an efficient equilibrium but inefficient equilibria can also exist due to pure bundling (for physical products) or slotting contracts. Under sequential pricing, we find that all equilibria are efficient regardless of whether firms can use slotting contracts, and both for digital goods and for physical goods. Therefore, sequential pricing presents an even stronger case for laissez-faire in the matter of bundling than simultaneous pricing.

Keywords: Bundling, Portfolios, Slots (or Shelf Space), Pure Bundling, Slotting Contracts

JEL Classification: D4, K21, L13, L41, L82

Suggested Citation

Jeon, Doh-Shin and Menicucci, Domenico, Bundling and Competition for Slots: Sequential Pricing (August 8, 2009). Available at SSRN: https://ssrn.com/abstract=1485367 or http://dx.doi.org/10.2139/ssrn.1485367

Doh-Shin Jeon (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34) 93 542 16 57 (Phone)
(34) 93 542 17 46 (Fax)

Domenico Menicucci

Universita' degli Studi di Firenze ( email )

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Firenze, 50127
Italy
+39-055-4374666 (Phone)
+39-055-4374913 (Fax)

HOME PAGE: http://www.dmd.unifi.it/index.php?loc=personal&id=d.menicucci

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