Curing Sinus Headaches and Tying Law: An Empirical Analysis of Bundling Decongestants and Pain Relievers

51 Pages Posted: 28 Sep 2005

See all articles by Michael A. Salinger

Michael A. Salinger

Boston University - Questrom School of Business

David S. Evans

Market Platform Dynamics; Berkeley Research Group, LLC

Date Written: August 2005

Abstract

We apply and extend the cost-based approach to bundling and tying under competition developed in Evans and Salinger (2004) to over-the-counter pain relievers and cold medicines. We document that consumers pay much less for tablets with multiple ingredients than they would if they bought tablets with each ingredient separately. We then decompose the sources of these savings into marginal cost savings and a component that reflects fixed costs of product offerings. The analysis both documents substantial economies of bundling and illustrates the sort of cost analysis that is necessary for understanding tying.

JEL Classification: L11

Suggested Citation

Salinger, Michael A. and Evans, David S., Curing Sinus Headaches and Tying Law: An Empirical Analysis of Bundling Decongestants and Pain Relievers (August 2005). CESifo Working Paper Series No. 1519, Available at SSRN: https://ssrn.com/abstract=810704 or http://dx.doi.org/10.2139/ssrn.810704

Michael A. Salinger (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-4408 (Phone)

David S. Evans

Market Platform Dynamics ( email )

140 South Dearborn St.
Chicago, IL 60603
United States

Berkeley Research Group, LLC ( email )

99 High St.
Boston, MA 02110
United States

HOME PAGE: http://davidsevans.org

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