Economic Theories of Bundling and Their Policy Implications in Abuse Cases: An Assessment in Light of the Microsoft Case

34 Pages Posted: 15 Nov 2004

See all articles by Kai-Uwe Kuhn

Kai-Uwe Kuhn

University of East Anglia (UEA) - Centre for Competition Policy; Centre for Economic Policy Research (CEPR)

Robert Stillman

Lexecon Ltd.

Cristina Caffarra

Lexecon Ltd.

Multiple version iconThere are 2 versions of this paper

Date Written: September 2004

Abstract

Theories of bundling have gained enormous prominence in European competition policy in a number of recent cases, concerning both merger control and abuse of dominance. Prominent and controversial examples include GE/Honeywell, Tetra Laval/Sidel and the recent Microsoft decision in which the European Commission ordered the unbundling of the Windows Media Player from Windows. In this paper we attempt to sketch how a systematic approach to bundling cases can be structured. For that purpose we first provide an overview of existing bundling theories, concentrating on the key economic mechanisms and their empirical implications. We discuss some of the errors that have been made in interpreting this body of literature by supporters of a "laissez faire" approach to bundling. We develop a number of criteria to identify potentially anticompetitive bundling, based on the more robust features of the theory and develop a decision rule that would allow for a sensible approach to the competition issues raised by bundling.

Keywords: Bundling, antitrust, foreclosure, software industries, Microsoft

JEL Classification: K21, L41

Suggested Citation

Kuhn, Kai-Uwe and Stillman, Robert and Caffarra, Cristina, Economic Theories of Bundling and Their Policy Implications in Abuse Cases: An Assessment in Light of the Microsoft Case (September 2004). Available at SSRN: https://ssrn.com/abstract=618589 or http://dx.doi.org/10.2139/ssrn.618589

Kai-Uwe Kuhn (Contact Author)

University of East Anglia (UEA) - Centre for Competition Policy ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Robert Stillman

Lexecon Ltd. ( email )

Orion House
5 Upper St Martin's Lane
London WC2H 9EA
United Kingdom

Cristina Caffarra

Lexecon Ltd. ( email )

Orion House
5 Upper St Martin's Lane
London WC2H 9EA
United Kingdom

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