Is bundling anticompetitive?

I analyze the implications of bundling on price competition in a market for complementary products. Using a model of imperfect competition with product differentiation, I identify the incentives to bundle for two types of demand functions and study how they change with the size of the bundle. With an inelastic demand, bundling creates an advantage over uncoordinated rivals who cannot improve by bundling. I show that this no longer holds with an elastic demand. The incentives to bundle are stronger and the market outcome is symmetric bundling, the most competitive one. Profits are lowest and consumer surplus is maximized.

Endogenous Mergers of Complements with Mixed Bundling

This paper studies endogenous mergers of complements with mixed bundling, by allowing both for joint and separate consumption. After merger, partner fi…rms decrease the price of the bundled system. Besides, when markets for individual components are suffi…ciently important, partner …firms raise prices of stand-alone products, exploiting their monopoly power in local markets and making substitute 'mix-and-match' composite products less attractive to consumers. Even though these effects favor the pro…fitability of mergers, merging is not always an equilibrium outcome. The reason is that outsiders respond by cutting their prices to retain their market share, and mergers can be unprofitable when competition is intense. From a welfare analysis, we observe that the number of mergers observed in equilibrium may be either excessive (when markets for individual components are important) or suboptimal (when markets for individual components are less important). Keywords: complements; merger; mixed bundling; separate consumption JEL classi…fication: L13; L41; D43

Bundling and competition for slots: Sequential pricing

In this paper we study, as in Jeon-Menicucci (2009), competition between sellerswhen each of them sells a portfolio of distinct products to a buyer having limitedslots. This paper considers sequential pricing and complements our main paper (Jeon-Menicucci, 2009) that considers simultaneous pricing.First, Jeon-Menicucci (2009) find that under simultaneous individual pricing, equilibriumoften does not exist and hence the outcome is often inefficient. By contrast,equilibrium always exists under sequential individual pricing and we characterize it inthis paper. We find that each seller faces a trade-off between the number of slots heoccupies and surplus extraction per product, and there is no particular reason thatthis leads to an efficient allocation of slots.Second, Jeon-Menicucci (2009) find that when bundling is allowed, there alwaysexists an efficient equilibrium but inefficient equilibria can also exist due to purebundling (for physical products) or slotting contracts. Under sequential pricing,we find that all equilibria are efficient regardless of whether firms can use slottingcontracts, and both for digital goods and for physical goods. Therefore, sequentialpricing presents an even stronger case for laissez-faire in the matter of bundling thansimultaneous pricing.

Bundling electronic journals and competition among publishers

Site licensing of e-journals has been revolutionizing the way academicinformation is distributed. However, many librarians are concerned aboutthe possibility that publishers might abuse site licensing by practicingbundling. In this paper, we analyze the private and social incentives forthe publishers to use bundling in the context of STM electronic journalmarket. In the short run in which the number of journals is exogenouslygiven, we find a strong conflict between the two incentives: each publisherfinds bundling optimal and bundling increases the industry profit butreduces social welfare. However, in the long run we find that publishersmight have higher incentives to introduce new journals under bundlingthan without bundling and, in this case, bundling can reduce the industryprofit while increasing social welfare. Finally, we examine publishers incentive to provide links to the websites of the rival publishers underbundling and show that even asymmetric publishers have incentive tointerconnect.

Bundling and competition for slots: On the portfolio effects of bundling

We consider competition among sellers when each of them sells a portfolio ofdistinct products to a buyer having limited slots. We study how bundling affectscompetition for slots. Under independent pricing, equilibrium often does not existand hence the outcome is often inefficient. When bundling is allowed, each sellerhas an incentive to bundle his products and an efficient equilibrium always exists.Furthermore, in the case of digital goods, all equilibria are efficient if slotting contracts are prohibited. We also identify portfolio effects of bundling and analyze theconsequences on horizontal mergers. Finally, we derive clear-cut policy implications.

Bundling under the Threat of Parallel Trade

This paper examines the use of bundling by a firm that sells in two national markets and faces entry by parallel traders. The firm can bundle its main product, - a tradable good- with a non-traded service. It chooses between the strategies of pure bundling, mixed bundling and no bundling. The paper shows that in the low-price country the threat of grey trade elicits a move from mixed bundling, or no bundling, towards pure bundling. It encourages a move from pure bundling towards mixes bundling or no bundling in the high-price country. The set of parameter values for which the profit maximizing strategy is not to supply the low price country is smaller than in the absence of bundling. The welfare effects of deterrence of grey trade are not those found in conventional models of price arbitrage. Some consumers in the low-price country may gain from the threat of entry by parallel traders although they pay a higher price. This is due to the fact that the firm responds to the threat of arbitrageurs by increasing the amount of services it puts in the bundle targeted at consumers in that country. Similarly, the threat of parallel trade may affect some consumers in the hight-price country adversely.

Bundling Strategies When Products Are Vertically Differentiated and Capacities Are Limited

We consider a seller who owns two capacity-constrained resources and markets two products (components) corresponding to these resources as well as a bundle comprising the two components. In an environment where all customers agree that one of the two components is of higher quality than the other and that the bundle is of the highest quality, we derive the seller's optimal bundling strategy. We demonstrate that the optimal solution depends on the absolute and relative availabilities of the two resources as well as upon the extent of subadditivity of the quality of the products. The possible strategies that can arise as equilibrium behavior include a pure components strategy, a partial- or full-spectrum mixed bundling strategy, and a pure bundling strategy, where the latter strategy is optimal when capacities are unconstrained. These conclusions are contrary to findings in the prior literature on bundling that demonstrated the unambiguous dominance of the full-spectrum mixed bundling strategy. Thus, our work expands the frontier of bundling to an environment with vertically differentiated components and limited resources. We also explore how the bundling strategies change as we introduce an element of horizontal differentiation wherein different types of customers value the available components differently.

Growth cone MKK7 mRNA targeting regulates MAP1b-dependent microtubule bundling to control neurite elongation

Local mRNA translation in neurons has been mostly studied during axon guidance and synapse formation but not during initial neurite outgrowth. We performed a genome-wide screen for neurite-enriched mRNAs and identified an mRNA that encodes mitogen-activated protein kinase kinase 7 (MKK7), a MAP kinase kinase (MAPKK) for Jun kinase (JNK). We show that MKK7 mRNA localizes to the growth cone where it has the potential to be translated. MKK7 is then specifically phosphorylated in the neurite shaft, where it is part of a MAP kinase signaling module consisting of dual leucine zipper kinase (DLK), MKK7, and JNK1. This triggers Map1b phosphorylation to regulate microtubule bundling leading to neurite elongation. We propose a model in which MKK7 mRNA localization and translation in the growth cone allows for a mechanism to position JNK signaling in the neurite shaft and to specifically link it to regulation of microtubule bundling. At the same time, this uncouples activated JNK from its functions relevant to nuclear translocation and transcriptional activation.

The identification and regulation of a novel interaction occurring between $\beta$-catenin and the actin -bundling protein fascin

Catenins were first characterized as linking the cytoplasmic domains of cadherin cell-cell adhesion molecules to the cortical actin cytoskeleton. In addition to their essential role in modulating cadherin adhesion, catenins have more recently been indicated to participate in cell and developmental signaling pathways. $\beta$-catenin, for example, associates directly with receptor tyrosine kinases and transcription factors such as LEF-1/TCF, and tranduces developmental signals within the Wnt pathway. $\beta$-catenin also appear to a role in regulating cell proliferation via its interaction with the tumor supressor protein APC. I have employed the yeast two-hybrid method to reveal that fascin, a bundler of actin filaments, binds to $\beta$-catenin's central Armadillo-repeat domain. The $\beta$-catenin-fascin interaction exists in cell lines as well as in animal brain tissues as revealed by immunoprecipitation analysis, and substantiated in vitro with purified proteins. Fascin additionally binds to plakoglobin, which contains a more divergent Armadillo-repeat domain. Fascin and E-cadherin utilize a similar binding-site within $\beta$-catenin, such that they form mutually exclusive complexes with $\beta$-catenin. Fascin and $\beta$-catenin co-localize at cell-cell borders and dynamic cell leading edges of epithelial and endothelial cells. Total immunoprecipitable b-catein has several isoforms, only the hyperphosphorylated isoform 1 associated with fascin. An increased $\beta$-catenin-fascin interaction was observed in HGF stimulated cells, and in Xenopus embryos injected with src kinase RNAs. The increased $\beta$-catenin association with fascin is correlated with increased levels of $\beta$-catenin phosphorylation. $\beta$-catenin, but not fascin, can be readily phosphorylated on tyrosine in vivo following src injection of embryos, or in vitro following v-src addition to purified protein components. These observations suggest a role of $\beta$-catenin phosphorylation in regulating its interaction with fascin, and src kinase may be an important regulator of the $\beta$-catenin-fascin association in vivo. The $\beta$-catenin-fascin interaction represents a novel catenin complex, that may conceivably regulate actin cytoskeletal structures, cell adhesion, and cellular motility, perhaps in a coordinate manner with its functions in cadherin and APC complexes. ^

Fascin, an Actin-bundling Protein, Induces Membrane Protrusions and Increases Cell Motility of Epithelial Cells

Fascin is an actin-bundling protein that is found in membrane ruffles, microspikes, and stress fibers. The expression of fascin is greatly increased in many transformed cells, as well as in specialized normal cells including neuronal cells and antigen-presenting dendritic cells. A morphological characteristic common to these cells expressing high levels of fascin is the development of many membrane protrusions in which fascin is predominantly present. To examine whether fascin contributes to the alterations in microfilament organization at the cell periphery, we have expressed fascin in LLC-PK1 epithelial cells to levels as high as those found in transformed cells and in specialized normal cells. Expression of fascin results in large changes in morphology, the actin cytoskeleton, and cell motility: fascin-transfected cells form an increased number of longer and thicker microvilli on apical surfaces, extend lamellipodia-like structures at basolateral surfaces, and show disorganization of cell–cell contacts. Cell migration activity is increased by 8–17 times when assayed by modified Boyden chamber. Microinjection of a fascin protein into LLC-PK1 cells causes similar morphological alterations including the induction of lamellipodia at basolateral surfaces and formation of an increased number of microvilli on apical surfaces. Furthermore, microinjection of fascin into REF-52 cells, normal fibroblasts, induces the formation of many lamellipodia at all regions of cell periphery. These results together suggest that fascin is directly responsible for membrane protrusions through reorganization of the microfilament cytoskeleton at the cell periphery.

Espin Contains an Additional Actin-binding Site in Its N Terminus and Is a Major Actin-bundling Protein of the Sertoli Cell–Spermatid Ectoplasmic Specialization Junctional Plaque

The espins are actin-binding and -bundling proteins localized to parallel actin bundles. The 837-amino-acid “espin” of Sertoli cell–spermatid junctions (ectoplasmic specializations) and the 253-amino-acid “small espin” of brush border microvilli are splice isoforms that share a C-terminal 116-amino-acid actin-bundling module but contain different N termini. To investigate the roles of espin and its extended N terminus, we examined the actin-binding and -bundling properties of espin constructs and the stoichiometry and developmental accumulation of espin within the ectoplasmic specialization. An espin construct bound to F-actin with an approximately threefold higher affinity (Kd = ∼70 nM) than small espin and was ∼2.5 times more efficient at forming bundles. The increased affinity appeared to be due to an additional actin-binding site in the N terminus of espin. This additional actin-binding site bound to F-actin with a Kd of ∼1 μM, decorated actin stress fiber-like structures in transfected cells, and was mapped to a peptide between the two proline-rich peptides in the N terminus of espin. Espin was detected at ∼4–5 × 106 copies per ectoplasmic specialization, or ∼1 espin per 20 actin monomers and accumulated there coincident with the formation of parallel actin bundles during spermiogenesis. These results suggest that espin is a major actin-bundling protein of the Sertoli cell–spermatid ectoplasmic specialization.

Actin-Bundling Protein Isolated from Pollen Tubes of Lily : Biochemical and Immunocytochemical Characterization

A 135-kD actin-bundling protein was purified from pollen tubes of lily (Lilium longiflorum) using its affinity to F-actin. From a crude extract of the pollen tubes, this protein was coprecipitated with exogenously added F-actin and then dissociated from F-actin by treating it with high-ionic-strength solution. The protein was further purified sequentially by chromatography on a hydroxylapatite column, a gel-filtration column, and a diethylaminoethyl-cellulose ion-exchange column. In the present study, this protein is tentatively referred to as P-135-ABP (Plant 135-kD Actin-Bundling Protein). By the elution position from a gel-filtration column, we estimated the native molecular mass of purified P-135-ABP to be 260 kD, indicating that it existed in a dimeric form under physiological conditions. This protein bound to and bundled F-actin prepared from chicken breast muscle in a Ca2+-independent manner. The binding of 135-P-ABP to actin was saturated at an approximate stoichiometry of 26 actin monomers to 1 dimer of P-135-ABP. By transmission electron microscopy of thin sections, we observed cross-bridges between F-actins with a longitudinal periodicity of 31 nm. Immunofluorescence microscopy using rhodamine-phalloidin and antibodies against the 135-kD polypeptide showed that P-135-ABP was colocalized with bundles of actin filaments in lily pollen tubes, leading us to conclude that it is the factor responsible for bundling the filaments.

Alpha 1(E)-catenin is an actin-binding and -bundling protein mediating the attachment of F-actin to the membrane adhesion complex.

Calcium-dependent homotypic cell-cell adhesion, mediated by molecules such as E-cadherin, guides the establishment of classical epithelial cell polarity and contributes to the control of migration, growth, and differentiation. These actions involve additional proteins, including alpha- and beta-catenin (or plakoglobin) and p120, as well as linkage to the cortical actin cytoskeleton. The molecular basis for these interactions and their hierarchy of interaction remain controversial. We demonstrate a direct interaction between F-actin and alpha (E)-catenin, an activity not shared by either the cytoplasmic domain of E-cadherin or beta-catenin. Sedimentation assays and direct visualization by transmission electron microscopy reveal that alpha 1(E)-catenin binds and bundles F-actin in vitro with micromolar affinity at a catenin/G-actin monomer ratio of approximately 1:7 (mol/mol). Recombinant human beta-catenin can simultaneously bind to the alpha-catenin/actin complex but does not bind actin directly. Recombinant fragments encompassing the amino-terminal 228 residues of alpha 1(E)-catenin or the carboxyl-terminal 447 residues individually bind actin in cosedimentation assays with reduced affinity compared with the full-length protein, and neither fragment bundles actin. Except for similarities to vinculin, neither region contains sequences homologous to established actin-binding proteins. Collectively these data indicate that alpha 1 (E)-catenin is a novel actin-binding and -bundling protein and support a model in which alpha 1(E)-catenin is responsible for organizing and tethering actin filaments at the zones of E-cadherin-mediated cell-cell contact.