Upstream Bundling and Leverage of Market Power

22 Pages Posted: 31 Jul 2018

See all articles by Alexandre de Corniere

Alexandre de Corniere

Toulouse School of Economics

Greg Taylor

University of Oxford - Oxford Internet Institute

Date Written: July 2018

Abstract

Motivated by the recent Google-Android antitrust case, we present a novel rationale for bundling by a multiproduct upstream firm. Consider a market where downstream firms procure components from upstream suppliers. U1 is the only supplier of component A, but faces competition for component B. Suppose that component A increases demand for the downstream product and that contractual frictions induce positive wholesale markups. By bundling A and B, U1 reduces its B-rivals' willingness to offer slotting fees to the downstream firm, thereby allowing U1 to capture more of the industry profit. Bundling harms the downstream firm and the B rivals, and can be anticompetitive.

Keywords: Bundling, Exclusion, Vertical Relations

JEL Classification: L1, L4

Suggested Citation

de Corniere, Alexandre and Taylor, Greg, Upstream Bundling and Leverage of Market Power (July 2018). CEPR Discussion Paper No. DP13083. Available at SSRN: https://ssrn.com/abstract=3222597

Alexandre De Corniere (Contact Author)

Toulouse School of Economics ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Greg Taylor

University of Oxford - Oxford Internet Institute ( email )

1 St. Giles
University of Oxford
Oxford OX1 3PG Oxfordshire, Oxfordshire OX1 3JS
United Kingdom

HOME PAGE: http://www.greg-taylor.co.uk

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