Article ID Journal Published Year Pages File Type
5059190 Economics Letters 2014 14 Pages PDF
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.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, ,