Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, July 12, 2010

Bundling without Price Discrimination

Posted by D. Daniel Sokol

Andrés Carvajal (Department of Economics, University of Warwick), Marzena Rostek (Department of Economics, University of Wisconsin-Madison), and Marek Weretka (Department of Economics, University of Wisconsin-Madison) offer the possibility of Bundling without Price Discrimination.

ABSTRACT: This paper examines the optimal bundling strategies of a multiproduct monopoly in markets in which a seller cannot monitor and thereby restrict the purchases of buyers to a single bundle, while buyers have resale opportunities. In such markets, the standard mechanism through which bundling increases seller profits, based on price discrimination, is not feasible. The profit-maximizing bundling strategy is characterized, given the restrictions on pricing policies resulting from resale and a lack of monitoring. The welfare implications of optimal bundling are analyzed.

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