Share This Article:

Bundling and Consumers’ Reservation Value: Effects on Market Entry

Full-Text HTML Download Download as PDF (Size:793KB) PP. 77-81
DOI: 10.4236/ti.2015.61008    4,278 Downloads   4,610 Views  
Author(s)    Leave a comment

ABSTRACT

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.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

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

References

[1] Whinston, M. (1990) Tying, Foreclosure, and Exclusion. American Economic Review, 80, 837-860.
[2] Nalebuff, B. (2004) Bundling as an Entry Barrier. Quarterly Journal of Economics, 119, 159-187.
http://dx.doi.org/10.1162/003355304772839551
[3] Peitz., M. (2008) Bundling May Blockade Entry. International Journal of Industrial Organization, 26, 41-58. http://dx.doi.org/10.1016/j.ijindorg.2006.09.005
[4] Matutes, C. and Regibeau, P. (1988) “Mix and Match”: Product Compatibility without Network Externalities. The RAND Journal of Economics, 19, 221-234.
http://dx.doi.org/10.2307/2555701
[5] Gans, J.S. and King, S.P. (2005) Paying for Loyalty: Product Bundling in Oligopoly. Journal of Industrial Economics, 54, 43-62.
[6] Matutes, C., and Regibeau, P. (1992) Compatibility and Bundling of Complementary Goods in a Duopoly. Journal of Industrial Economics, 40, 37-54.
http://dx.doi.org/10.2307/2950626
[7] Thanassoulis, J. (2007) Competitive Mixed Bundling and Consumer Surplus. Journal of Economics & Management Strategy, 16, 437-467.
http://dx.doi.org/10.1111/j.1530-9134.2007.00145.x
[8] Armstrong, M. and Vickers, J. (2010) Competitive Nonlinear Pricing and Bundling. The Review of Economic Studies, 77, 30-60.
http://dx.doi.org/10.1111/j.1467-937X.2009.00562.x

  
comments powered by Disqus

Copyright © 2018 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.