Mixed Bundling in Two-Sided Markets: Theory and Evidence

Chao, Yong; Derdenger, Timothy

doi:10.2139/ssrn.1757214

Cited by 8 publications

(7 citation statements)

References 32 publications

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“…Mixed bundling here acts as a price discrimination device, as in one-sided models, and the presence of the bundle reduces the cost of cutting console and game prices in order to encourage participation by both consumers and developers. Chao and Derdenger (2012) present an empirical analysis of video game pricing that reaches conclusions consistent with their theoretical model.…”

Section: Tying and Bundlingmentioning

confidence: 63%

“…Chao and Derdenger (2012) investigate mixed bundling -selling the products individually and (at a discount) in a bundle. Consider a monopoly video game platform that is considering a mixed bundling strategy: offering a bundle consisting of a console and some games as well as selling the console alone and allowing video game developers to sell games by themselves.…”

Section: Tying and Bundlingmentioning

confidence: 99%

“…Ignoring indirect network effects, one would expect that the optimal mixed bundling strategy would have higher prices for both the console and games when sold separately than would be optimal if the bundle were not offered, since the bundle enables the firm to segment the market according to the number of games buyers prefer to consume. Chao and Derdenger (2012) present a model in which network effects make it is optimal to reduce both console and game prices if a bundle is offered. Mixed bundling here acts as a price discrimination device, as in one-sided models, and the presence of the bundle reduces the cost of cutting console and game prices in order to encourage participation by both consumers and developers.…”

Section: Tying and Bundlingmentioning

confidence: 99%

See 2 more Smart Citations

The Antitrust Analysis of Multisided Platform Businesses

Evans¹,

Schmalensee²

2014

Oxford Handbooks Online

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This Chapter provides a survey of the economics literature on multi-sided platforms with particular focus on competition policy issues, including market definition, mergers, monopolization, and coordinated behavior. It provides a survey of the general industrial organization theory of multi-sided platforms and then considers various issues concerning the application of antitrust analysis to multi-sided platform businesses. It shows that it is not possible to know whether standard economic models, often relied on for antitrust analysis, apply to multi-sided platforms without explicitly considering the existence of multiple customer groups with interdependent demand. It summarizes many theoretical and empirical papers that demonstrate that a number of results for single-sided firms, which are the focus of much of the applied antitrust economics literature, do not apply directly to multi-sided platforms.

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Section: Tying and Bundlingmentioning

confidence: 63%

Section: Tying and Bundlingmentioning

confidence: 99%

Section: Tying and Bundlingmentioning

confidence: 99%

See 1 more Smart Citation

The Antitrust Analysis of Multisided Platform Businesses

Evans¹,

Schmalensee²

2014

Oxford Handbooks Online

View full text Add to dashboard Cite

show abstract

“…Chao and Derdenger investigate mixed bundling which involves selling the products individually and together at a discount over the separate prices. 42 Consider a monopoly video game platform that is considering a mixed bundling strategy: offering a bundle consisting of a console and some games as well as selling the console alone and allowing video game developers to sell games by themselves. Ignoring indirect network effects, one would expect that the optimal mixed bundling strategy would have higher prices for both the console and games than would be optimal if the bundle were not offered, since the bundle enables the firm to segment the market according to the number of games they prefer to consumer.…”

Section: Amentioning

confidence: 99%

Economics of Vertical Restraints for Multi-Sided Platforms

Evans

2013

SSRN Journal

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This paper presents an overview of what economists can say about vertical constraints by multi-sided platforms at this stage in the development of our knowledge about the economics of these businesses. It describes the general procompetitive and anticompetitive uses of vertical restraints by multi-sided platforms. It then focuses on the role of critical mass for multi-sided platforms and how vertical restraints might be used on the one hand, anti-competitively to prevent rivals from achieving critical mass and long-term growth and, on the other hand, pro-competitively, to ensure the platform and its customers that the platform will remain viable.

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“…This means that platforms need to get -both sides on board,‖ attracting users on both sides to adopt their platforms simultaneously. There are pricing strategies and structures that can overcome this problem (Armstrong 2006;Caillaud and Jullien 2003;Chao and Derdenger 2010;Tirole 2003, 2006).…”

Section: Network Externalities In Two-sided Networkmentioning

confidence: 99%

Courting Two-Timers: Multi-Homing Users’ Preferences for Two-Sided Exchange Networks

Koh

Fichman

2012

Proceedings

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Our research analyzes users' preferences for two-sided exchange networks that serve distinct but interdependent types of users (e.g. buyers and suppliers). To do this we look at multi-homing users' participation on multiple independent and competing platforms. We use a unique dataset of 118 multihoming buyers' participation in two online exchanges and examine how activity levels on both sides of these exchanges affect users' preferences for the exchanges. We find that users' preferences are positively associated with activity levels on the opposite side of the platforms. Higher inter-network activity levels positively affect users' perception of a platform's usefulness and motivate increased participation on that platform relative to the competing platform. We also find that users' preferences are non-linearly related to activity levels on the same side of the platform. At low intra-network activity levels, an increase in activity level has a positive effect on users' preferences. This effect may derive from the principle of social proof, where individual users observe and imitate other similar users' behaviors. At high intra-network activity levels, there is a negative effect of increased activity level due to greater competition among users on the same side. Our results show how competition between networks serving the same users is affected by the social information conveyed by other users participating on each network. It complements the existing IS literature, which typically focuses on single-homing users and/or one-sided network technologies.

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Mixed Bundling in Two-Sided Markets: Theory and Evidence

Cited by 8 publications

References 32 publications

The Antitrust Analysis of Multisided Platform Businesses

The Antitrust Analysis of Multisided Platform Businesses

Economics of Vertical Restraints for Multi-Sided Platforms

Courting Two-Timers: Multi-Homing Users’ Preferences for Two-Sided Exchange Networks

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