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Yang-Ming Chang and Hung-Yi Chen
''Strategic and welfare implications of product bundling under Bertrand competition''
( 2012, Vol. 32 No.4 )
This paper examines how Bertrand competition affects the welfare implications of bundling by a multi-product firm, which is a monopoly over one good and faces a single-product competitor in a second good. We find that the equilibrium bundle price is lower than the sum of the prices of the two goods sold separately. We also show that bundling benefits both firms but hurts consumers, despite that social welfare increases. Under price competition, bundling thus creates a conflict between the maximization of social welfare and consumer surplus.
Keywords: commodity bundling; multiproduct firm; social welfare; Bertrand price competition
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
D4 - Market Structure and Pricing: General
Manuscript Received : Apr 17 2012 Manuscript Accepted : Oct 22 2012

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