Competitive Bundling and Offer Design in a Symmetric Bertrand Duopoly

Author:

Roels Guillaume1ORCID,Khodabakhshian Araz2,Karmarkar Uday S.3

Affiliation:

1. INSEAD, Fontainebleau 77300, France;

2. The Walt Disney Company, Burbank, California 91521;

3. UCLA Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095

Abstract

How should digital service firms design and bundle their offering to capture a large market while seeking differentiation from competition? To answer this question, we consider the most generic model of competition, namely, two symmetric firms competing on price with regard to two (independent or complementary) components with an arbitrary distribution of valuations, without restrictions on their product offering. We show that three outcomes emerge in equilibrium, namely, a full-mixed bundling monopoly, a full-mixed bundling competitive duopoly leading to a price war, and a pure or partial-mixed bundling differentiated duopoly yielding positive profits for both firms. The latter equilibrium is the most plausible because it is the only one that is both trembling-hand perfect and not payoff dominated. We demonstrate the benefits of bundling under competition, thereby explaining the online platforms’ motivation for and success in expanding their offering horizontally. Yet not all products may be offered in equilibrium to avoid direct or indirect competition; hence, competition may lead to a narrower range of products available than a monopoly. Is bundling anticompetitive? It is a double-edged sword. On the one hand, it softens price competition by allowing firms to differentiate their offering. On the other hand, it stimulates competition by creating some product overlap.

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Subject

Marketing,Management Science and Operations Research,Modeling and Simulation,Business and International Management

Cited by 1 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3