Equilibrium product bundling

This article offers an equilibrium theory of product bundling by rival firms. In several models where a primary good is produced in a duopoly market and one or more other goods is produced under perfectly competitive conditions, bundling is shown to emerge as an equilibrium strategy of one or both of the duopolists for its role as a product-differentiation device. When the rival firms can commit to bundling sales,their profits are higher, but social welfare is reduced.