Abstract
Bundling can be thought of as akin to a volume discount, but one where the volume is based on aggregate sales across products. Instead of offering a discount for buying two apples rather than one, the customer is given a better price for buying an apple and an orange together. Bundling may be used to reduce cost and improve quality, and for price discrimination. While the Chicago School has argued that a monopolist cannot gain by bundling its monopoly good with a competitive product, recent work suggests that in a dynamic game bundling can help protect and leverage market power.
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Nalebuff, B. (2018). Bundling and Tying. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2534
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2534
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