Packaging and quality improvements
DOI:
https://doi.org/10.46661/revmetodoscuanteconempresa.3624Keywords:
packaging, quality improvements, telecommunications, regulationAbstract
This study presents the competition beyond a single product market where a multi-product firm competes with monoproduct rivals through the use of different bundling strategies that impact the firms' incentives to make quality improvements in different ways. The pure bundling strategy can make the multi-product firm invest in quality improvements when the associated costs are comparatively low, and the additional utility of quality improvement is relatively high, but it discourages single-product firms from improving quality. In the case of mixed bundling, this result inevitably happens in the most competitive market, and is probably found in the less competitive market when markets are not so different in competitive intensity. Therefore, both bundling strategies affect the consumer surplus when the two markets are significantly different in the intensity of competition due to the negative influence of the market distortions after interrelating the two markets.
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