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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

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Volume 2, Issue 1 (Jul 2002)

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Volume 1 (2001)

System Components, Network Effects, and Bundling

Matthew T. Clements
  • 1University of British Columbia,
Published Online: 2002-07-23 | DOI: https://doi.org/10.2202/1538-0653.1046

Abstract

I investigate the competition between suppliers of components of a system for which there are network effects among users. Bundling one of these components with an outside good reduces the cost to consumers of using the system. This cost reduction is not necessarily welfare-enhancing, and bundling can also reduce welfare by decreasing innovation incentives. The model is used to evaluate Microsoft's bundling of Windows with Internet Explorer and its effect on competition with Netscape.

Keywords: network effects; bundling

About the article

Published Online: 2002-07-23


Citation Information: Topics in Economic Analysis & Policy, ISSN (Online) 1538-0653, DOI: https://doi.org/10.2202/1538-0653.1046. Export Citation

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