Claire Chambolle and Hugo Molina
Publication year: 2020

Abstract:

This article provides a new rationale for the “leverage theory” of bundling in vertical markets. We analyze a framework with a capacity-constrained retailer and uncover that buyer power explains the emergence of bundling practices by a multiproduct manufacturer to foreclose a more efficient upstream rival. We further show that the retailer may counteract this adverse effect by expanding its stocking
capacity. Finally, we highlight that a ban on bundling practices may restore the retailer’s incentives to restrict its stocking capacity which generates detrimental effects for welfare.

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