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Qing Hu and Tomomichi Mizuno
''Positive Effects of Bundling on Rival's Profit and Social Welfare in a Vertical Relationship''
( 2021, Vol. 41 No.1 )
The effects of bundling on the rival's profit and social welfare are analyzed in this paper. We consider a vertical relationship with an upstream firm offering inputs to two downstream firms. In the downstream market, one firm produces two products and can bundle them, while the other produces only one product. We find that bundling is preferred and can also increase the rival firm's profit and social welfare, which is in contrast to the conventional wisdom that profitable bundling never increases the profit of the rival and social welfare in a Cournot competition.
Keywords: Bundling, vertical market, Cournot competition, duopoly
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
D4 - Market Structure and Pricing: General
Manuscript Received : Mar 14 2020 Manuscript Accepted : Mar 10 2021

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