Thursday, December 21, 2017

On the Profitability of Interfirm Bundling in Oligopolies

Sang-Hyun Kim (Yonsei University) and Jong-Hee Hahn (Yonsei University) offer thoughts On the Profitability of Interfirm Bundling in Oligopolies.

ABSTRACT: This paper examines the pro?tability of bundling or exclusive dealing among independent ?rms selling di¢´erentiated products. We show that, compared with separate sales, inter?rm bundling generally raises prices and is more pro?table provided the distribution of consumer valuations for products are su¡Ë ciently sym- metric and centered in the middle. Hence the ?rms have mutual incentives to o¢´er their products as a bundle or make exclusive dealing arrangements. We shed new light on the role of bundling in relaxing competition in oligopoly, the importance of which has been neglected in the previous literatures.

| Permalink