http://www.antitrustreview.com/archives/303 News and commentary about antitrust, economics, technology, policy Tue, 07 Oct 2008 12:57:32 +0000 http://wordpress.org/?v=2.2 http://www.antitrustreview.com/archives/303#comment-729 Antitrust Review » More on Mixed Bundling and Cross Subsidies Thu, 23 Feb 2006 21:59:22 +0000 http://www.antitrustreview.com/archives/303#comment-729 <p>[...] I have argued that one way to construct an argument against the permissibility of above-cost mixed bundling (and against applying a predatory-pricing analysis to mixed bundling) is look at the cross subsidy from the monoply market for Wm to the competitive market for Wc. Dan Cran responded that cross subsidies using the monopoly profits shouldn’t matter: When A offers the bundle at a $1.50 discount, it is sacrificing a profit of $1.50 per sale in order to “exclude” B from the market. Money is fungible. That sacrifice is identical to the sacrifice A would make if it took $1.50 out of a bank account to pay for single-product predation. It is no more plausible to think that A would sacrifice the $1.50 of monopoly profits to effectuate an above-variable-cost price that B must meet than to think that A would withdraw that money from its bank account to engage in single-market predation. The recoupment doesn’t happen any sooner. A can only charge a monopoly price for Wc if it first drives out B. [...]</p> […] I have argued that one way to construct an argument against the permissibility of above-cost mixed bundling (and against applying a predatory-pricing analysis to mixed bundling) is look at the cross subsidy from the monoply market for Wm to the competitive market for Wc. Dan Cran responded that cross subsidies using the monopoly profits shouldn’t matter: When A offers the bundle at a $1.50 discount, it is sacrificing a profit of $1.50 per sale in order to “exclude” B from the market. Money is fungible. That sacrifice is identical to the sacrifice A would make if it took $1.50 out of a bank account to pay for single-product predation. It is no more plausible to think that A would sacrifice the $1.50 of monopoly profits to effectuate an above-variable-cost price that B must meet than to think that A would withdraw that money from its bank account to engage in single-market predation. The recoupment doesn’t happen any sooner. A can only charge a monopoly price for Wc if it first drives out B. […]

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