Output commitment through product bundling: Experimental evidence

J. Hinloopen, W. Müller, H.T. Normann

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We analyze the impact of product bundling in experimental markets. One firm has monopoly power in a first market but competes with another firm à la Cournot in a second market. We compare treatments where the multi-product firm (i) always bundles, (ii) never bundles, and (iii) chooses whether to bundle or not. We also contrast the simultaneous and the sequential order of moves in the duopoly market. Our data indicate support for the theory of product bundling: with bundling and simultaneous moves, the multi-product firm offers the predicted number of units. When the multi-product firm is the Stackelberg leader, the predicted equilibrium is better attained with bundling, especially when it chooses to bundle, even though in theory bundling should not make a difference here. In sum, bundling works as a commitment device that enables the transfer of market power from one market to another.
Original languageEnglish
Pages (from-to)164-180
JournalEuropean Economic Review
Volume65
DOIs
Publication statusPublished - 2014

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Product bundling
Bundling
Multiproduct firms
Stackelberg
Market power
Cournot
Experimental markets
Monopoly power
Duopoly

Cite this

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Output commitment through product bundling : Experimental evidence. / Hinloopen, J.; Müller, W.; Normann, H.T.

In: European Economic Review, Vol. 65, 2014, p. 164-180.

Research output: Contribution to journalArticleScientificpeer-review

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