Bundling, entry deterrence, and specialist innovators

Jay Pil Choi, Christodoulos Stefanadis

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

We examine a mechanism by which bundling may inefficiently deter entry into the market. The model considers an incumbent monopolist in two complementary components that faces a series of entry attempts by rivals. It is shown that the incumbent can practice bundling to buttress its monopoly position by keeping specialist innovators out of the market. Bundling prevents specialist rivals from coordinating in the dynamic entry process, reducing the probability of an eventual displacement of the incumbent. The specialization decisions of rivals are also distorted. Bundling may lead to lower customer and total economic welfare.

Original languageEnglish
Pages (from-to)2575-2594
Number of pages20
JournalJournal of Business
Volume79
Issue number5
DOIs
Publication statusPublished - 2006 Sep 1

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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