Paying for loyalty: product bundling in oligopoly
In recent times, pairs of retailers such as supermarket and retail gasoline chains have offered bundled discounts to customers who buy their respective product brands. These discounts are a fixed amount off the headline prices that allied brands continue to set independently. In this paper, we model this bundling using Hotelling competition between two brands of each product. We show that a pair of firms can profit from offering a bundled discount to the detriment of firms who do not bundle and...[Show more]
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