Bundling and collusion in communications markets. (26th April 2010)

• Record Type: Journal Article
• Authors: Baranes, Edmond
• Is Part Of: International journal of management and network economics. Volume 1:Number 4(2009)
• Page Start: 357
• Page End: 377
• Publication Date: 2010-04-26
• Subjects: networks -- bundling -- access charge -- unbundling local loop -- collusion -- telecommunications -- competition -- regulation -- differentiation -- communications markets -- management; Business networks -- Periodicals; Econometrics -- Periodicals; 338.805
• Languages: English
• ISSNs: 1754-2316

Abstract

This paper deals with competition in communications markets between an incumbent and a competitor. We analyse the effect of bundling strategy by a firm that enters an incumbent market. This market dimension has deep implications on the sustainability of collusion. In an infinitely repeated game framework, we show that the bundling strategy of the entrant might hinder collusion. Furthermore, we consider a setting in which the competitor uses a one-way access that the incumbent possesses. In such a situation, we show that when the competitor bundles its products, a low access charge might increase the feasibility of collusion. This result has an important policy implication.