Products and Services Bundling Under Horizontal Market Competitions

This paper investigates the impact of products and services bundling from the perspective of providers and customers by comparing the profit and consumer surplus under two scenarios where providers apply “fully compete” and “no bundle” strategies respectively. The result shows that higher customer value and congestion cost can benefit the providers under the “bundle ban” policy, while the service price greatly influences the profit distribution between products and services providers. Contrarily, the low customer value and congestion cost can benefit customers to some extent. Our study gives managerial insight to policymakers on how products and services bundling can achieve better social welfare under certain circumstances and help providers to execute proper strategies in a competitive market.