Competition Effect Of Dominant Firm’s Bundling Strategy

Bundling is one of the hot topics in Anti-trust Economics. Economists and anti-trustinstitutions constantly focus on effects of dominant firms’ bundling on marketcompetition and social welfare. Based on “360.vs.Tencent QQ”, this paper analyzesbundling effect on market competition, innovation and financing by the method of gametheory. To find out the logic between bundling, innovation and financing, this papersupposes the market is a imperfectly competitive market initially, and constructs adouble-goods and oligopoly model to analyze whether bundling is beneficial; then thispaper reconstructs the model into a three-stage dynamical model to analyze howdominant firm’s bundling will harm other independent firm’s innovation and financing.Through the mathematical analysis, this paper concludes that dominant firm’s bundlingwill improve other firm’s cost and lower the possibility of getting financial investmentfrom capital market.According to the analysis, without the constraint of financing, dominant firm’s bundlingstrategy will improve rival’s cost, while if there is constraint of financing, dominantfirm’s bundling strategy will lower the rival’s probability of being financed. Therefore,whether there is constraint of financing, dominant firm’s bundling strategy will causeanti-competitive effect. This paper combine bundling, innovation and financing togetherto avoid independent analysis of the three factors. At last, this paper analyze thepractical anti—trust case named “360vs. QQ” to test whether the result of the modelcan meet the real word.