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|Title: ||Bundling and Competition for Slots|
|Authors: ||Jeon, Doh-Shin - Universitat Pompeu Fabra|
Menicucci, Domenico - Universita degli Studi di Firenze
|Keywords: ||Bundling, Competition among Portfolios, Limited Slots (or Shelf Space)|
|Issue Date: ||2007 |
|Series/Report no.: ||NET Institute Working Paper;07-15|
|Abstract: ||We study competition among upstream firms when each of them sells a
portfolio of distinct products and the downstream has a limited number
of slots (or shelf space). In this situation, we study how bundling
a¤ects competition for slots. When the downstream has k number of
slots, social e¢ ciency requires that it purchases the best k
products among all upstream firms' products. We find that under
bundling, the outcome is always socially efficient but under individual
sale, the outcome is not necessarily efficient. Under individual sale,
each upstream firm faces a trade-off between quantity and rent
extraction due to the coexistence of the internal competition (i.e.
competition among its own products) and the external competition (i.e.
competition from other firms' products), which can create inefficiency.
On the contrary, bundling removes the internal competition and the
external competition among bundles makes it optimal for each upstream
firm to sell only the products belonging to the best k. This unambiguous
welfare-enhancing e¤ect of bundling is novel.|
|Appears in Collections:||NET Institute Working Papers Series|
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