Bundling

40 Pages Posted: 22 Nov 1999

See all articles by Barry J. Nalebuff

Barry J. Nalebuff

Yale University - Yale School of Management; Yale University - Cowles Foundation

Date Written: November 22, 1999

Abstract

In this paper, we look at the case for bundling in an oligopolistic environment. We show that bundling is a particularly effective entry-deterrent strategy. A company that has market power in two goods, A and B, can, by bundling them together, make it harder for a rival with only one of these goods to enter the market. Bundling allows an incumbent to defend both products without having to price low in each. The traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist. Although price discrimination provides a reason to bundle, the gains are small compared to the gains from the entry-deterrent effect.

JEL Classification: D43, L11, L12, C7

Suggested Citation

Nalebuff, Barry, Bundling (November 22, 1999). Yale ICF Working Paper Series No. 99-14. Available at SSRN: https://ssrn.com/abstract=185193 or http://dx.doi.org/10.2139/ssrn.185193

Barry Nalebuff (Contact Author)

Yale University - Yale School of Management ( email )

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Yale University - Cowles Foundation ( email )

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HOME PAGE: http://barrynalebuff.com

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