Working paper

Upstream Bundling and Leverage of Market Power

Alexandre Cornière (de), and Greg Taylor

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.

JEL codes

  • L1: Market Structure, Firm Strategy, and Market Performance
  • L4: Antitrust Issues and Policies

Replaced by

Alexandre de Cornière, and Greg Taylor, Upstream Bundling and Leverage of Market Power, The Economic Journal, vol. 131, n. 640, 2021, pp. 3122–3144.

Reference

Alexandre Cornière (de), and Greg Taylor, Upstream Bundling and Leverage of Market Power, TSE Working Paper, n. 17-827, July 2017, revised October 2019.

See also

Published in

TSE Working Paper, n. 17-827, July 2017, revised October 2019