Claire Chambolle and Hugo Molina
Publication year: 2018

Abstract:

This article examines the exclusionary effects of bundling by a multi-product manufacturer in a vertical chain with a downstream monopolist. We highlight that the presence of buyer power is a key condition for the emergence of bundling in equilibrium, which triggers exclusion of an efficient rival supplier to the detriment of both the retailer and the industry profit. We show that the retailer is able to counteract these adverse effects by expanding its stocking capacity. Among the policy implications drawn from our model, we argue that banning bundling may be inefficient as it restores the retailer’s incentive to restrict its stocking capacity for a rent-extraction motive.

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