Mixed Bundling in Duopoly

EC-93-29

17 Pages Posted: 15 Sep 2003

See all articles by Nicholas Economides

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

Abstract

We present a model where producers of complementary goods have the option to practice mixed bundling. In the first stage of a two-stage game, firms choose between a mixed bundling and a non- bundling strategy. In the second stage, firms choose prices. We show that mixed bundling is a dominant strategy for both firms. However, when the composite goods are not very close substitutes, at the bundling-bundling equilibrium both firms are worse off than when they both commit not to practice mixed bundling.

JEL Classification: L1, D4

Suggested Citation

Economides, Nicholas, Mixed Bundling in Duopoly. EC-93-29, Available at SSRN: https://ssrn.com/abstract=6539 or http://dx.doi.org/10.2139/ssrn.6539

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