Antitrust & Competition Policy Blog

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

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Wednesday, August 15, 2012

Multimarket Contact, Bundling and Collusive Behavior

Posted by D. Daniel Sokol

Juan-Pablo Montero and Esperanza Johnson (both Catholic University of Chile) explore Multimarket Contact, Bundling and Collusive Behavior.

ABSTRACT: We study the static and dynamic implications of non-linear pricing schemes (i.e., bundling) for otherwise unrelated products but for multimarket contact. Bundling is always present in competition but unlikely in a cartel agreement. Although it brings extra profits to the cartel –sometimes charging a premium rather than a discount for the bundle–, bundling makes deviation from the agreement far more attractive. Depending on the correlation of consumers’ preferences, this deviation effect is either reinforced with milder punishments (for positive correlations) or partially offset with harsher punishments (for negative correlations). The deviation effect is so strong that it even dominates a zero-profit (pure-bundling) punishment.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/08/multimarket-contact-bundling-and-collusive-behavior-.html

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