Armstrong, Mark (2010): Bundling revisited: substitute products and inter-firm discounts.
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This paper extends the standard model of bundling to allow products to be substitutes and for products to be supplied by separate sellers. Whether integrated or separate, firms have an incentive to introduce bundling discounts when demand for the bundle is elastic relative to demand for stand-alone products. Separate firms often have a unilateral incentive to offer inter-firm bundle discounts, although this depends on the detailed form of substitutability. Bundle discounts mitigate the innate substitutability of products, which can relax competition between firms and induce an integrated firm to lower all of its prices when it follows a bundling strategy.
|Item Type:||MPRA Paper|
|Original Title:||Bundling revisited: substitute products and inter-firm discounts|
|Keywords:||Price discrimination; bundling; oligopoly; loyalty pricing|
|Subjects:||M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M31 - Marketing
L - Industrial Organization > L4 - Antitrust Issues and Policies > L42 - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection
|Depositing User:||Mark Armstrong|
|Date Deposited:||17. Nov 2010 12:43|
|Last Modified:||20. Feb 2013 05:13|
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