Article

Bundling Information Goods

Jay Pil Choi

in The Oxford Handbook of the Digital Economy

Published in print August 2012 | ISBN: 9780195397840
Published online November 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780195397840.013.0011

Series: Oxford Handbooks

 Bundling Information Goods

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This article, which reports the theory of product bundling, is particularly relevant in the context of the digital economy. It also addresses the price discrimination theory of bundling. Firm's bundling decision may alter the nature of competition and thus have strategic effects in its competition against its rivals. In the case of competitive bundling, the strategic incentives to bundle depend on the nature of available products and the prevailing market structures for the available products. The incentives to bundle depend on the influences of bundling on price competition. Consumers indirectly benefit from the number of adopters of the same hardware. Microsoft's bundling practices have found antitrust investigations on both sides of the Atlantic. Bundling is a profitable and credible strategy in that it increases the bundling firm's profit and may make the rival firms unable to sell their journals. The leverage theory of bundling has significant implications for antitrust analysis.

Keywords: product bundling; digital economy; price discrimination; firms; competition; competitive bundling; Microsoft; leverage theory; antitrust analysis

Article.  15816 words. 

Subjects: Economics ; Economic Development and Growth

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