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Upstream Bundling and Leverage of Market Power

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  • Cornière (de), Alexandre
  • Taylor, Greg

Abstract

We present a novel rationale for bundling in vertical relations. In many markets, upstream firms compete to be in the best downstream slots (e.g., the best shelf in a retail store or the default application on a platform). Bundling by a multiproduct upstream firm can soften competition for slots by reducing rivals' value for them. This strategy does not rely on entry deterrence and can be achieved through contractual or even virtual tying. We also study the effects of upstream bundling on the downstream market; by intensifying competition there, bundling can leave consumers better-off even when there is foreclosure upstream.

Suggested Citation

  • Cornière (de), Alexandre & Taylor, Greg, 2017. "Upstream Bundling and Leverage of Market Power," TSE Working Papers 17-827, Toulouse School of Economics (TSE), revised Oct 2019.
    • Handle: RePEc:tse:wpaper:31806
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    References listed on IDEAS

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    2. Afilipoaie, Adelaida & Donders, Karen & Ballon, Pieter, 2022. "The European Commission's approach to mergers involving software-based platforms: Towards a better understanding of platform power," Telecommunications Policy, Elsevier, vol. 46(5).
    3. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    4. Steffen, Nico & Wiewiorra, Lukas & Kroon, Peter, 2021. "Wettbewerb und Regulierung in der Plattform- und Datenökonomie," WIK Discussion Papers 481, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    5. Chambolle, Claire & Christin, Clémence & Molina, Hugo, 2023. "Buyer power and exclusion: A progress report," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    6. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    7. Jong-Hee Hahn & So Hye Yoon, 2020. "Tying in Two-Sided Markets with Below-Cost or Negative Pricing," Working papers 2020rwp-177, Yonsei University, Yonsei Economics Research Institute.
    8. Rossitza Kotzeva & David Kovo & Szabolcs Lorincz & Geza Sapi & Lluis Sauri & Tommaso Valletti, 2019. "Recent Developments at DG Competition: 2018/2019," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(4), pages 551-578, December.
    9. Chiara Fumagalli & Massimo Motta, 2024. "Economic Principles for the Enforcement of Abuse of Dominance Provisions," Working Papers 1431, Barcelona School of Economics.
    10. Wipusanawan, Chayanin, 2023. "Standard-essential patents, innovation, and competition," Other publications TiSEM 292e319a-9e6a-4465-8f8f-7, Tilburg University, School of Economics and Management.
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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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