The Law and Economics of Bundled Pricing: LePage’s, PeaceHealth and the Evolving Antitrust Standard

32 Pages Posted: 9 Jul 2011

See all articles by Benjamin Klein

Benjamin Klein

University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon

Andres V. Lerner

Compass Lexecon

Date Written: 2008

Abstract

The economics of bundled discounts are examined by breaking the contract into two elements: (1) what the firm is buying, and (2) how the firm is paying for what it is buying. The firm is buying preferred distribution, a common aspect of competition for distribution that benefits consumers. The firm is paying for preferred distribution with price discounts on products that have a high price-cost margin, a less costly way to purchase distribution that also benefits consumers. This efficiency in purchasing distribution is the economic basis for the PeaceHealth court’s view that a firm using bundled discounts need not bear any short-term costs that must be recouped. However, anticompetitive effects require substantial foreclosure of distribution, a factor not considered in either LePage’s or PeaceHealth.

JEL Classification: L42, K21

Suggested Citation

Klein, Benjamin and Lerner, Andres V., The Law and Economics of Bundled Pricing: LePage’s, PeaceHealth and the Evolving Antitrust Standard (2008). Antitrust Bulletin, Vol. 53, No. 3, Fall 2008. Available at SSRN: https://ssrn.com/abstract=1657114

Benjamin Klein (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

1999 Avenue of the Stars
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Los Angeles, CA 90067-4628
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310-728-2070 (Fax)

HOME PAGE: http://www.econ.ucla.edu/people/Faculty/Klein.html

Compass Lexecon ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=152

Andres V. Lerner

Compass Lexecon ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-6028
United States
310-728-2026 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/pages/bio.aspx?ID=155

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