Bundling, Tying, and Portfolio Effects: Part 1 Conceptual Issues

Table of contents
1 Introduction..............................................................................................8
1.1 Conclusions of the Report ............................................................................9
2 What is Bundling?...............................................................................13
2.1 Pure Bundling..............................................................................................13
2.2 Mixed Bundling ...........................................................................................14
2.3 Tying............................................................................................................15
2.4 Metering .....................................................................................................16
3 Incentives to Bundle ..........................................................................18
3.1 Can Market Power Be Leveraged?.............................................................19
3.2 Introduction to the Chicago School Argument ...........................................20
3.3 Where the Chicago School Argument Breaks Down .................................22
3.3.1 Exception #1: Metering .....................................................................22
3.3.2 Exception #2: Dynamics ....................................................................24
3.3.3 Exception #3: Leveraging Multiple Market Powers ..........................26
3.3.4 Exception #4: Creating Efficiencies ...................................................27
4 Why Bundle: The Complete List...................................................28
4.1 Plus Factors / Minus Factors ......................................................................29
4.2 Index ...........................................................................................................30
4.3 Efficiency Reasons......................................................................................31
4.3.1 Bundling to Achieve Cost Savings and Quality Improvements .........31
4.3.2 Bundling to Reduce Pricing Inefficiencies .........................................33
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