Buyer Power, Upstream Bundling, and Foreclosure

56 Pages Posted: 16 Jan 2020 Last revised: 3 Feb 2020

See all articles by Claire Chambolle

Claire Chambolle

Ecole Polytechnique, Paris - Laboratoire d'Econometrie; National Institute for Agricultural Research (INRA)

Hugo Molina

French National Institute for Agricultural Research (INRA)

Date Written: December 30, 2019

Abstract

This article provides a new rationale for the "leverage theory" of bundling in vertical markets. We analyze a framework with a capacity-constrained retailer and uncover that buyer power explains the emergence of bundling practices by a multi-product manufacturer to foreclose a more efficient upstream rival. We further show that the retailer may counteract this adverse effect by expanding its stocking capacity. Finally, we highlight that a ban on bundling practices may restore the retailer's incentives to restrict its stocking capacity which generates detrimental effects for welfare.

Keywords: vertical relations, buyer power, exclusionary bundling, slotting fees, endogenous network, antitrust policy

JEL Classification: C78, L13, L42

Suggested Citation

Chambolle, Claire and Molina, Hugo, Buyer Power, Upstream Bundling, and Foreclosure (December 30, 2019). Available at SSRN: https://ssrn.com/abstract=3511692 or http://dx.doi.org/10.2139/ssrn.3511692

Claire Chambolle

Ecole Polytechnique, Paris - Laboratoire d'Econometrie ( email )

1 rue Descartes
Paris, 75005
France
(33) 01 55 55 82 58 (Phone)
(33) 01 55 55 84 28 (Fax)

National Institute for Agricultural Research (INRA)

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France

Hugo Molina (Contact Author)

French National Institute for Agricultural Research (INRA) ( email )

65 boulevard de Brandebourg
Ivry-sur-Seine, 94205
France

HOME PAGE: http://sites.google.com/site/hugomolinaresearch/

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