Abstract
This paper examines the profitability of interfirm bundling among independent single-good producers in a two-dimensional Hotelling framework. We show that interfirm bundling tends to relax price competition by preventing consumers from mixing and matching (i.e., making it difficult to switch brands) and therefore is more profitable than separate sales, provided that firms are sufficiently symmetric. Hence, firms have mutual incentives to offer their products as a bundle or to make exclusive dealing arrangements. This result sheds new light on the competitive effect of bundling in oligopolies that have been neglected in the literature.
| Original language | English |
|---|---|
| Pages (from-to) | 657-673 |
| Number of pages | 17 |
| Journal | Journal of Economics and Management Strategy |
| Volume | 31 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2022 Aug 1 |
Bibliographical note
Funding Information:We thank the coeditor and two anonymous referees for insightful comments and suggestions. Also, thanks to In Ho Lee, Juwon Seo, Euncheol Shin, John Vickers, Kyoung‐Soo Yoon, Jidong Zhou, and the audiences at EARIE 2018 conference at Athens for valuable comments and discussions. Sang‐Hyun Kim gratefully acknowledges the support of the Yonsei Signature Research Cluster Program of 2021 (2021‐22‐0011).
Publisher Copyright:
© 2022 Wiley Periodicals LLC.
All Science Journal Classification (ASJC) codes
- Business, Management and Accounting(all)
- Economics and Econometrics
- Strategy and Management
- Management of Technology and Innovation