All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC

Victor Ginsburgh and Israel Zang
''Bundling by Competitors and the Sharing of Profits''
( 2007, Vol. 12 No.16 )
We discuss the effects of bundling two goods offered by two symmetric firms. This situation requires the use of some sharing rule for the profits from the sales of the bundle. We show that the choice of this rule may have substantial effects on prices and profits – even if the possible rules eventually yield equal shares. In particular, the use of the a priori equal sharing rule yields lower prices and profits, than a price weighted sharing rule. When competitors bundle, they can implicitly cooperate via the setting of the profit sharing rule and increase their profits at the expense of consumers. This issue calls for some further attention by regulators.
L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Jul 05 2007 Manuscript Accepted : Aug 22 2007

  This abstract has been downloaded 1720 times                The Full PDF of this paper has been downloaded 156025 times