Abstract
The analytical literature on commodity bundling explains the practice of selling two or more differentiated products in a single package as a surrogate for direct price discrimination. In contrast, this paper shows that imperfect competition creates a strategic incentive to bundle. The profitability of bundling, whether it adversely affects rival producers, and whether it yields an overall efficiency gain depends inter alia on the nature of product market competition. The role of complementarity in explaining why firms bundle is also explored. Copyright 1990 by Blackwell Publishing Ltd.
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