| NOTAS: | "This paper studies the competitive efects of bundled discounts offered by pairs of inde-
pendent firms. In a setting with vertically diferentiated goods where firms decide whether
to participate in a discounting scheme before prices are set, it is shown that, in equilib-
rium, all pairs of firms producing goods of the same quality level offer bundled discounts
and, relative to the no-bundling benchmark: (i) all headline prices rise; (ii) all bundle
prices, net of the respective discount, decrease; and (iii) only high quality sellers will
obtain higher profits. Furthermore, this equilibrium corresponds to the worst scenario in
terms of consumers' welfare and decreases social welfare." |
