“Tacit bundling” among rivals
- Author(s)
- Anastasia Leontiou, Nicholas Ziros
- Abstract
This paper derives a stochastic discount strategy that encourages the joint consumption of two partial-substitute goods. The seller of the less valuable product offers a limited-availability discount to consumers with reference-dependent preferences à la Kőszegi and Rabin (2006). The stochastic discount introduces uncertainty in the consumers’ outcomes and increases their willingness to pay. Due to market competition, such stochastic pricing is effective only when it induces consumers to purchase both products. The other seller, who can only use deterministic pricing, tacitly consents as he has no benefit from engaging in a price war. Thus, a collusive outcome – which harms consumer welfare – is achieved without any explicit coordination between the two sellers.
- Organisation(s)
- Department of Economics
- External organisation(s)
- University of Cyprus
- Journal
- European Economic Review
- Volume
- 165
- ISSN
- 0014-2921
- DOI
- https://doi.org/10.1016/j.euroecorev.2024.104726
- Publication date
- 06-2024
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502013 Industrial economics, 502045 Behavioural economics
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics, Finance
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/06774ce9-699b-49b8-982d-16f188494243