Bundling new products with old to signal quality, with application to the sequencing of new products

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Abstract

This paper provides a new rationale for bundling based on informational leverage. Bundling a product of established quality to one of unknown quality can mitigate the problem of asymmetric information encountered in the latter market. Leveraging reputation in one market into another has implications for the timing of new product introductions. Bundling motivated by informational leverage enhances efficiency by increasing consumer's access to costly information. When the possibility of endogenous timing of product introduction is considered, however, the welfare consequences of bundling are ambiguous. The positive effect of market creation must be weighed against the negative effect of market delay.

Original languageEnglish
Pages (from-to)1179-1200
Number of pages22
JournalInternational Journal of Industrial Organization
Volume21
Issue number8
DOIs
Publication statusPublished - 2003 Oct

All Science Journal Classification (ASJC) codes

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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