Commodity Bundling

4 Key excerpts on "Commodity Bundling"

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  Antitrust Policy and Vertical Restraints

  • Robert W. Hahn(Author)
  • 2007(Publication Date)
  • Brookings Institution Press and AEI

    (Publisher)

  See, for example, Ray Martin, “Save by ‘Bundling,’” CBSNews.com , February 28, 2003 (www.cbsnews.com/stories/2003/02/28/earlyshow/contributors/raymartin/ main542428.shtml). context, bundling is an efficient form of competitive advertising that directly benefits consumers through lower prices on high-value promotional items. 2 Bundle discounts are also used by business as a way to facilitate entry into new markets. For example, cable companies are now attempting to compete with telecommunications companies by offering competing bundles that include digital telephone service, high-speed Internet service, and digital cable. Telecommunications companies have responded by offering discounts if consumers bundle their bundled phone service and DSL service with satel-lite television service. This bundle-versus-bundle competition is blurring the lines between these two once-distinct industries, and the resulting increase in competition has called into question the wisdom and viability of existing telecommunications regulations. Bundling is also used as a way to reduce the transaction and information costs involved in purchasing, distributing, and selling goods and services. Bundling can enable firms to achieve economies of scale or scope in pro-duction and distribution, and can allow them to package and market inte-grated and compatible products to consumers. These transaction cost savings can explain the use of standardized option packages for automobiles, com-puter hardware and software, and the packaging of cold remedies and anal-gesics. 3 Bundling allows firms to offer a discrete number of standardized products to consumers and can serve to reduce consumers’ and firms’ search and information costs. 4 Moreover, bundling can be used to reduce the divergence in incentives that exists between manufacturers and those who distribute their products.

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  Industrial Organization

  Markets and Strategies

  • Paul Belleflamme, Martin Peitz(Authors)
  • 2015(Publication Date)
  • Cambridge University Press

    (Publisher)

  By contrast, in the second setting, the two goods are perfect complements: they are the components of a system. Two firms each offer a differentiated version of each component. Here, bundling intensifies competition because it reduces variety and leads to lower prices through the internalization of the complementarity link between the two components. 11.3.1 Bundling as a way to soften price competition When firms produce a homogeneous product and compete in prices, they may use bundling as a way to differentiate their products and, thereby, reduce price competition in their primary market. To formalize this idea, we extend the model of Section 11.1 in the following way. 40 We still have a unit mass of consumers who have preferences over goods A and B and who are each identified by a couple ( θ A , θ B ) drawn from the uniform distribution over the unit square. In contrast with the previous setting, we assume now that (i) good A is produced by two firms (denoted 1 and 2) at marginal cost c A < 1 and (ii) good B is produced by a perfectly competitive industry at marginal cost c B < 1. Firms 1 and 2 are also able to produce good B ; however, they will not decide to produce good B separately, as there is no profit to be made on that market. The issue is thus whether they might have an incentive to bundle good B with good A . We analyse the following two-stage game. In the first stage, the two firms choose their marketing strategy. There are three possible actions: sell good A only (specialization), sell the bundle AB only (pure bundling), or sell both good A and the bundle (mixed bundling). In the second stage, firms set the price(s) for the product(s) they have decided to sell. Starting with the second stage, it is quickly seen that in five out of the nine subgames, the unique Nash equilibrium (in pure strategies) is such that both firms earn zero profit.

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  Marketing High Profit Product/Service Solutions

  • Roger More(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  1 The Global Expansion of New Product/service Integrated Customer Solutions: The Bundling Concept

  In rapidly changing global competitive business to business (B2B) marketplaces, one of the fastest growing competitive market strategies is the bundling of complex value-added integrated product/service customer solutions.

  Roger More, 2012

  Introduction

  The huge growth in the size and complexity of integrated product/service bundled market offerings in virtually every competitive global business-to-business market represents important future competitive opportunities for many companies. Companies are increasingly competing on “bundles” of products and services that differentiate them and that customers will value and choose. This chapter will map and outline what products are, what services represent, and the different strategic choices companies have for product/service strategies in different competitive markets, citing many examples. It will outline and illustrate product-centric strategies, service-centric strategies and product/service integrated strategies. The changes in product/service integration and bundling represent great opportunities to grow markets and long-term potential cash flows for many companies of all sizes and industries. It is important for managers to be clear about the differences and connections between products and services in B2B markets.

  The chapter will then proceed to map the most important alternative product/service market positions that need to be considered. It will outline three different broad market focus positions – product-centric bundles, service-centric bundles, and product/service integrated bundles – examining a series of companies that exemplify these strategic choices in their product and service portfolios. The chapter will conclude with a series of important questions for managers facing these difficult product and service strategic choices.

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  The Law and Economics of Article 102 TFEU

  • Robert O'Donoghue QC, Jorge Padilla, Robert O'Donoghue KC(Authors)
  • 2020(Publication Date)
  • Hart Publishing

    (Publisher)

  Chapter 11 TYING AND BUNDLING

  11.1 . INTRODUCTION

  Definition. Tying and bundling generally refer to the combined sale of more than one product. Various types of tying and bundling can be distinguished, depending on how many components of a bundle/tie are also sold individually. At least three variants are distinguishable under EU competition law:

  1. Pure bundling is observed when neither of the package components is offered individually; they can only be acquired as part of the bundle. Thus, given two products, A and B, only the package A-B is available. Moreover, they are typically, though not always, offered in fixed proportions: e.g., a bottle of shampoo with a bottle of hair conditioner. Examples of pure bundling are fixed price lunch menus, bed with breakfast accommodation, and mandatory warranties. In Napier Brown-British Sugar ,1 for instance, the Commission condemned British Sugar’s practice of denying its customers the possibility to collect their orders directly from the factory, forcing them instead to use the producer’s delivery service.

  2. Tying refers to situations where some of the goods contained in a package are offered on their own (the so-called tied products), whereas others are not available individually (the tying products). Thus, consumers of the latter (the tying products) are forced to acquire the former (the tied products). For example, given two products, A and B, if product A is tied to product B a customer who wants to buy A must also buy B, whereas it is possible to buy product B without buying product A. Moreover, products can be tied together physically (i.e., a technological integration) as well as through contractual obligations that prescribe joint sale (i.e., a contractual tie). In Microsoft , the Commission found that Microsoft abused its dominant position by requiring OEMs to ship their PCs with Windows Media Player pre-installed. The Commission also concluded that such arrangement amounted to a technological tie from the perspective of consumers since it was impossible to remove the media player once installed by the OEM.2

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