Output Commitment Through Product Bundling: Experimental Evidence

Tinbergen Institute Discussion Paper No. 11-170/1

40 Pages Posted: 29 Nov 2011 Last revised: 20 Feb 2019

See all articles by Jeroen Hinloopen

Jeroen Hinloopen

CPB Netherlands Bureau of Economic Policy Analysis; University of Amsterdam - Amsterdam School of Economics (ASE); Tinbergen Institute

Wieland Müller

University of Vienna, Department of Economics & VCEE; Tilburg University, Department of Economics & CentER

Hans-Theo Normann

Heinrich Heine University Dusseldorf - Department of Economics; Max Planck Institute for Research on Collective Goods

Date Written: July 14, 2013

Abstract

We analyze the impact of product bundling in experimental markets. One firm has monopoly power in a first market but competes with another firm in a second market. We compare treatments where the multiproduct firm (i) always bundles, (ii) never bundles, and (iii) chooses whether or not to bundle. We also contrast the simultaneous and the sequential order of moves in the duopoly market. Our data indicate support for the theory of product bundling: with bundling and simultaneous moves, the multiproduct firm offers the predicted number of units. When the multiproduct firm is the Stackelberg leader, the predicted equilibrium is better attained with bundling, especially when it chooses to bundle, even though in theory bundling should not make a difference here. In sum, bundling works as a commitment device that enables the transfer of market power from one market to another.

Keywords: Cournot, commitment, experiments, product bundling, Stackelberg

JEL Classification: C92, D43, L11, L12, L41

Suggested Citation

Hinloopen, Jeroen and Müller, Wieland and Normann, Hans-Theo, Output Commitment Through Product Bundling: Experimental Evidence (July 14, 2013). Tinbergen Institute Discussion Paper No. 11-170/1. Available at SSRN: https://ssrn.com/abstract=1965966 or http://dx.doi.org/10.2139/ssrn.1965966

Jeroen Hinloopen (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Wieland Müller

University of Vienna, Department of Economics & VCEE ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

HOME PAGE: http://https://homepage.univie.ac.at/wieland.mueller/

Tilburg University, Department of Economics & CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/w.mueller-3.htm

Hans-Theo Normann

Heinrich Heine University Dusseldorf - Department of Economics ( email )

Duesseldorf
Germany

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
47
Abstract Views
394
PlumX Metrics