Post date: Apr 22, 2016 5:13:31 AM
Often, product bundling is conducted by a "retailer" that aggregates products from many different "producers" - this is common in the TV, media and entertainment industries, but also in travel, computing, and services. My paper (published in Marketing Science, 2013; PDF at issuu.com) considers the distinctive economic forces in multi-firm bundling. I show when multiple firms (manufacturers) contribute to the bundled good, they tend to desire an excessive share of the benefits (the retailer’s price for the bundle), thereby substantially erasing the demand-side benefits from bundling. This tendency weakens the practice of bundling, especially when the producers have multiple distribution channels, and leads to frequent price disputes such as the carriage-fee disputes between content providers (e.g., Disney) and retailers (e.g., DirecTV). Ultimately it severely disrupts the retailer's business model, forcing the weakened retailer to recapture market power by shifting towards production (vertical integration) or exclusive distribution rights for popular content (exclusivity alliances).