Bundled discounts: Strategic substitutes or complements?

• Autor(a) principal: Brito, Duarte Miguel Machado Carneiro de
• Data de Publicação: 2014
• Outros Autores: Vasconcelos, Helder
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: https://doi.org/10.1016/j.econlet.2014.05.031
• topic: Strategic; substitutes; Bilateral bundling; Bundled discounts; Strategic substitutes

Abstract Bundled discounts by pairs of otherwise independent firms play an increasingly important role as a strategic tool in several industries. Given that prices of firms competing for the same consumers are strategic complements, one would expect their discounts levels also to be strategic complements. However, in this paper we show that under some circumstances bundled discounts may be strategic substitutes. This occurs under vertically differentiated products where a low quality pair of producers may indeed prefer to lower its discount after an increase in the discount offered by a high quality pair of producers.