Author(s)

Qing Hu

Graduate School of Economics, Kobe University, Kobe, Japan.

We consider a multiproduct incumbent which monopolizes one market but faces a potential entrant in another market. In a two dimensional Hotelling model, when consumers’ reservation value is relatively high, we show that the incumbent has an incentive to use bundling to deter entry only if a prior commitment is applicable. However, when consumers’ reservation value is low, the multiproduct firm even has no incentive to use bundling and bundling has no effect on entry deterrence.

Bundling, Entry Deterrence, Multiproduct firm, Product-Specific Preferences

Hu, Q. (2015) Bundling and Consumers’ Reservation Value: Effects on Market Entry. Technology and Investment, 6, 77-81. doi: 10.4236/ti.2015.61008.