Item

Output commitment through product bundling: Experimental evidence

Hinloopen,J.
; 
Müller,W.
; 
Normann,H.T.
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.
Description
Date
2014
Journal Title
Journal ISSN
Volume Title
Publisher
Collections
Tilburg University Research Output Collection
Show all metadata
Research Projects
Organizational Units
Journal Issue
Keywords
Citation
Hinloopen, J, Müller, W & Normann, H T 2014, 'Output commitment through product bundling : Experimental evidence', European Economic Review, vol. 65, pp. 164-180. https://doi.org/10.1016/j.euroecorev.2013.11.006
URI
https://hdl.handle.net/20.500.14602/60230
License
info:eu-repo/semantics/restrictedAccess
Embedded videos