Evaluating the Profitability of Product Bundling in the Context of NegotiationsFree content

Esther Gal‐Or
The Journal of Business
Vol. 77, No. 4 (October 2004), pp. 639-674

Abstract:

I develop a model to evaluate the profitability of product bundling in the context of negotiations between a monopolist and intermediaries that sell its products to consumers. I investigate whether the monopolist finds it feasible and advantageous to utilize product bundling to block negotiations between the intermediaries and a rival firm, which competes against the monopolist in a complementary market. My model demonstrates that bundling can be affected by intermediate bargaining power. Specifically, while the example I consider supports the profitability of product bundling when the monopolist sells its product directly to consumers, the existence of negotiations with intermediaries may reverse this result.

Evaluating the Profitability of Product Bundling in the Context of NegotiationsFree content