Harmful Unbundling

Companies have been unbundling their products: they have been selling products and services separately that were traditionally sold together. In doing so, they have raised their profits. This paper uses a model to show how companies can use unbundling to increase profits and decrease competition. Unbundling raises problems when it increases information cost, information asymmetry, and barriers to entry. This paper also discusses the U.S. case law that has grasped with these issues of bundling and unbundling

Bundling of Information Goods - Past, Present and Future

Bundling of information goods (such as software and digitized music or TV) is omnipresent in today’s business-to-consumer environment. However, a surprisingly small number of articles address this issue within the information systems science (ISS) literature. By conducting a thorough literature review on the subject, this article shows that a lion’s share of the most important work on information technology product bundling is published outside the ISS arena. On the basis of the literature review, eight future research directions are presented

Harmful Unbundling

Companies have been unbundling their product: they have been selling separately products and services that were traditionally sold together.  In doing so, they have raised their profits.  This paper uses a model to show how companies can use unbundling to increase profits and decrease competition.  Unbundling raises problems when it increases information cost, information asymmetry, and barriers to entry.  This paper also discusses the US case laws that have grasped with these issues of bundling and unbundling

The effects of variety and bundling on choice and satisfaction: Applications to new telecommunication and media services

The purpose of this working paper is twofold; 1)to review consumer behavior literature on how assortment variety and bundling influence choice related variables, and 2)to apply this review on an analysis of telecommunication and new services. Literature related to the characteristics of assortment/bundle, perception of the assortment/bundle, perception of the choice situation, choice, perception of the choice, and experience with the chosen option is reviewed with focus on assortment and bundling. The review is based on an open literature search using keywords as “assortment size”, “assortment variety”, “bundling” and “unbundling” in databases as ISI and Ebsco. In addition, manual reviews of references used in the articles revealed from the databases have also been used to make sure we cover as many relevant articles as possible. The articles reviewed are briefly summarized in table 1 (assortment studies) and table 2 (bundling studies). Based on the literature reviewed, the results revealed are applied in a theoretical analysis of the effects of variety and bundling on choice- and post-choice related variables in new telecommunication and media services. Six services are discussed; traditional telephony and broadband services, mobile internet services and applications, services in heterogeneous access networks, multiplay services, TV-channel network services, and online video services. The analyses focus on potential effects of assortment variety and bundling on choice and post choice related variables for each of the six services. Because regulatory authorities typically use variety to stimulate efficient competition, some regulatory issues of relevance for each of the six services are also briefly discussed. The main results from the general consumer literature review on variety and bundling is summarized. A brief summary of what seems to be the most relevant issues related to variety, bundling, and regulatory actions for the six telecommunication and media services analyzed is also presented. The review of the literature and the analyses of the six services show a significant need for research on how variety and bundling influence choice and choice related variables. A discussion of potential routes for future research together with a preliminary draft of a research model closes the discussion of this working paper

Analyzing Pricing Strategies for Online-Services with Network Effect

In this study, we model firms that sell a product and a complementary online service, where only the latter displays positive network effects. That is, the value each consumer derives from the service increases with the total number of consumers that subscribe to the service. In addition, the service is valuable only to consumers who buy the product. We consider two pricing strategies: 1) bundle pricing, in which the firm charges a single price for the product and the service; and 2) separate pricing, in which the firm sets the prices of the product and the service separately, and consumers self-select whether to buy both or only the product. We show that, in contrast to the common result in the bundling literature, often the monopolist chooses not to offer the bundle (he either sells the service separately or not at all) while bundling would increase consumer surplus and social welfare. Thus, under-provision of the service can be the market outcome. We also demonstrate that network effects may cause the under-provision of the service.http://deepblue.lib.umich.edu/bitstream/2027.42/83713/1/1156_Etzion.pd

Appropriate Liability Rules for Tying and Bundled Discounting

This article asserts a comprehensive response to Elhauge’s provocative arguments. With respect to tying, the article shows that governing Supreme Court precedent does not deem the non-foreclosure “power” effects of the practice to be anticompetitive and that those effects are unlikely to reduce social welfare in the long run, especially after accounting for dynamic efficiencies. With respect to bundled discounting, the article shows that Elhauge’s proposed liability rule is both inapposite to consumer harm and inadministrable and that both “linked” market foreclosure and a form of below-cost pricing are necessary for anticompetitive harm and should therefore be prerequisites to antitrust liability

Specialty Drugs and the Health Care Cost Crisis

Specialty drugs, often dispensed by specialty pharmacies, are among the most expensive drugs on the market. They are significant contributors to the American health care cost problem, but in many ways they escape public and regulatory scrutiny. Surprisingly, medications are designated as specialty drugs by pharmacy benefit managers (PBMs), entities that are part of the insurance industry, rather than by the Food and Drug Administration or medical authorities.Specialty drugs have thus far received little attention in the legal literature. Yet, they raise important legal and regulatory questions. For example, there are no federal government rules (and only a handful of state laws) concerning what “specialty drug” means. As a result, PBMs could be motivated to designate drugs as specialty medications because they own many of the large specialty pharmacies and stand to profit by directing consumers to them. PBMs’ ownership of specialty pharmacies raises troubling questions about conflicts of interest and patient choice. In addition, the lack of regulatory pricing constraints in the United States disproportionately affects specialty drug consumers because of these items’ very high prices. The activites of specialty drug manufacturers, PBMs, and pharmacies raise antitrust concerns as well. This Article is the first to analyze specialty drugs from a legal and policy perspective and to formulate recommendations for regulatory interventions that are necessary to safeguard the welfare of specialty drug consumers

Buy local, buy fresh?: exploring local fresh produce consumer motivations and interests

May 2007.Originally published under series title: Agribusiness marketing report