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Dominance and Competitive Bundling

Hurkens, Sjaak, Jeon, Doh-Shin and Menicucci, Domenico (2019) Dominance and Competitive Bundling. American Economic Journal: Microeconomics, 11 (3). pp. 1-33.

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Identification Number : 10.1257/mic.20170131


We study how bundling affects competition between two asymmetric multi-product firms. One firm dominates the other in that it produces better products more efficiently. For low (high) levels of dominance, bundling intensifies (relaxes) price competition and lowers (raises) both firms’ profits. For intermediate dominance levels, bundling increases the dominant firm’s market share substantially, thereby raising its profit while reducing its rival’s profit. Hence, the threat to bundle is then a credible foreclosure strategy. We also identify circumstances in which a firm that dominates only in some markets can profitably leverage its dominance to other markets by tying all its products.

Item Type: Article
Language: English
Date: August 2019
Refereed: Yes
Uncontrolled Keywords: Bundling, Tying, Leverage, Dominance, Entry Barrier
JEL Classification: D43 - Oligopoly and Other Forms of Market Imperfection
L13 - Oligopoly and Other Imperfect Markets
L41 - Monopolization; Horizontal Anticompetitive Practices
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 08 Jun 2018 08:12
Last Modified: 02 Apr 2021 15:57
OAI Identifier:

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