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 TI  Vol.6 No.1 , February 2015
Bundling and Consumers’ Reservation Value: Effects on Market Entry
Qing Hu
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Abstract: We consider a multiproduct incumbent which monopolizes one market but faces a potential entrant in another market. In a two dimensional Hotelling model, when consumers’ reservation value is relatively high, we show that the incumbent has an incentive to use bundling to deter entry only if a prior commitment is applicable. However, when consumers’ reservation value is low, the multiproduct firm even has no incentive to use bundling and bundling has no effect on entry deterrence.
Keywords: Bundling, Entry Deterrence, Multiproduct firm, Product-Specific Preferences
Cite this paper: Hu, Q. (2015) Bundling and Consumers’ Reservation Value: Effects on Market Entry. Technology and Investment, 6, 77-81. doi: 10.4236/ti.2015.61008.
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