Skip navigation
Skip navigation

Paying for loyalty: product bundling in oligopoly

Gans, Joshua; King, Stephen

Description

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]

dc.contributor.authorGans, Joshua
dc.contributor.authorKing, Stephen
dc.date.accessioned2004-07-14
dc.date.accessioned2004-09-28T04:48:56Z
dc.date.accessioned2011-01-05T08:54:32Z
dc.date.available2004-09-28T04:48:56Z
dc.date.available2011-01-05T08:54:32Z
dc.date.created2004
dc.identifier.urihttp://hdl.handle.net/1885/41985
dc.identifier.urihttp://digitalcollections.anu.edu.au/handle/1885/41985
dc.description.abstractIn 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 consumers whose preferences are farther removed from the bundled brands. Indeed, when both pairs of firms negotiate bundling arrangements, there are no beneficiaries (the effect on equilibrium profits is zero) and consumers simply find themselves consuming a sub-optimal brand mix. If the two separate products are owned by the same firm, additional complications arise although if both product sets are integrated, no bundled discounts are offered in equilibrium.
dc.format.extent275365 bytes
dc.format.extent350 bytes
dc.format.mimetypeapplication/pdf
dc.format.mimetypeapplication/octet-stream
dc.language.isoen_AU
dc.subjectdiscounts
dc.subjectintegration
dc.subjectimperfect competition
dc.subjectbundling
dc.titlePaying for loyalty: product bundling in oligopoly
dc.typeWorking/Technical Paper
local.description.refereedno
local.identifier.citationmonthmar
local.identifier.citationyear2004
local.identifier.eprintid2666
local.rights.ispublishedyes
dc.date.issued2004
local.contributor.affiliationANU
local.contributor.affiliationAustralian Centre of Regulatory Economics
local.citationWorking Paper Series in Regulatory Economics No.2
CollectionsANU Research Publications

Download

File Description SizeFormat Image
04-02.pdf268.91 kBAdobe PDFThumbnail
2666-~X6.XSH350 BUnknown


Items in Open Research are protected by copyright, with all rights reserved, unless otherwise indicated.

Updated:  19 May 2020/ Responsible Officer:  University Librarian/ Page Contact:  Library Systems & Web Coordinator