Antitrust & Competition Policy Blog

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

Wednesday, November 7, 2018

Upstream Bundling and Leverage of Market Power

Alexandre de Corniere, Toulouse School of Economics and Greg Taylor, University of Oxford - Oxford Internet Institute write on Upstream Bundling and Leverage of Market Power.

ABSTRACT: Motivated by the recent Google-Android antitrust case, we present a novel rationale for bundling by a multiproduct upstream firm. Consider a market where downstream firms procure components from upstream suppliers. U1 is the only supplier of component A, but faces competition for component B. Suppose that component A increases demand for the downstream product and that contractual frictions induce positive wholesale markups. By bundling A and B, U1 reduces its B-rivals' willingness to offer slotting fees to the downstream firm, thereby allowing U1 to capture more of the industry profit. Bundling harms the downstream firm and the B rivals, and can be anticompetitive.

https://lawprofessors.typepad.com/antitrustprof_blog/2018/11/upstream-bundling-and-leverage-of-market-power.html

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