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Product bundling

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1030:(Pay TV) have bundled TV channels since the inception of both. In the early years of the cable industry this was necessary due to the technological constraints associated with allowing and blocking channels transmitted via analog methods. The progress towards complete cable, internet, and telephone packages gave subscribers many more options as well as offering hundreds of channels. The "package" price depends on the level of service a customer prefers within each bundle. The services range from low speed internet and minimum channels to high speed internet and the addition of many premium channels. In the US prices for pay TV have doubled in the last twenty years, averaging 6% per year, while wages have remained the same for nearly 20 years causing dissatisfaction and many cancellations. Costs have risen 53% since 2007 and 717:; consumers may be forced to buy bundles which don't contain all the things they wanted, and contain things they don't want, and may even be pushed into buying inferior products. For example, two companies both sell a bundle containing a computer and an operating system, but one has poor-quality hardware and one has poor-quality software. The consumer wants to buy each company's good product, but can't unless they pay for two computers and two operating systems and throw one of each away. A new company which sells only hardware or only operating systems also has to persuade the consumer to throw away a purchased product; this is a 609:
simplicity to a set of confusing or tedious choices; (3) the bundle solves a problem for the consumer; (4) the bundle is focused and lean in an effort to avoid carrying or including options, goods or services the consumer has no use for; and (5) the bundle generates interest or even controversy. Number 1 can be read as simply that a bundle should cost less than buying each item separately; however, even if the bundle were to cost the same in dollars, a bundle may still be an appealing value proposition for a consumer, as they do not have to hand-pick each accessory and add-on item (this is the 2nd and 3rd point).
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increasingly important role in many industries (e.g. banking, insurance, software, automotive) and some companies even build their business strategies on bundling. In bundle pricing, companies sell a package or set of goods or services for a lower price than they would charge if the customer bought all of them separately. Pursuing a bundle pricing strategy allows a business to increase its profit by using a discount to induce customers to buy more than they otherwise would have.
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100. Seller can generate a maximum revenue of only $ 240 by setting a $ 60 price for each product—both consumers will buy both products. Revenue cannot be increased without bundling because as the seller increases the price above $ 60 for one of the goods, one of the consumers will refuse to buy it. With bundling, a seller can generate revenue of $ 320 by bundling the products together and selling the bundle at $ 160. Thus, bundling can be considered a form of
151: 43: 617:, they can use the design of the basket item list as a way to promote new products or brands that a customer may not know or as a way to liquidate merchandise that is not selling well. Also, even though many bundles are less expensive than all of the items if purchased separately, in some cases the bundle costs more than if each item was purchased separately; this tactic is particularly effective in high-end retailing where 868:
three HTIB tiers, though, have a similar value proposition for the buyer: the HTIB package ensures that all of the speakers are of the correct impedance and power handling capabilities, the cables are of the correct type, and the crossover points and other technical details have been set up by the manufacturer.
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is a type of product bundling in which the "product" is a candidate in an election who markets his or her bundle of attributes and political positions to the voters. For example, a political candidate may market herself as a centrist candidate by ensuring she/he has centrist social, economic, and law
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Consumers have heterogeneous demands and such demands for different parts of the bundle product are inversely correlated. For example, assume consumer A values a word processor software at $ 100 and a spreadsheet processor at $ 60, while consumer B values a word processor at $ 60 and spreadsheet at $
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have vacation tour bundles that may include air tickets, rail tickets, a rental car, hotels, restaurants, museum and sightseeing attraction tickets and live music event tickets. These bundles include products and services from the transportation, accommodation, tourism, food service and entertainment
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or other source for playing back movies, a HTIB package provides all of the electronics hardware, speakers and cables needed to set up a home cinema. There are three grades of HTIB bundles: economy bundles, aimed at the lowest price point; mid-tier bundles, the most common type; and higher-cost HTIB
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Help the company generate more sales and maximize profits. Product bundling can maximize consumer surplus so that consumers feel that they have obtained additional items, so customers are more likely to spend a total of one time to purchase multiple products. This can help the company increase total
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Product bundling may lead to the cannibalization of branded products. These products can be purchased outside of the bundled sales package. For example, if a company sells bundled products and individual products at the same time, then the bundled products will get more sales, which will reduce the
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and other higher-end manufacturers. At the economy grade HTIB package, the customer is provided with a basic home theatre set-up, with modest sound quality and relatively few options for adjusting the sound. The mid-tier and upper-tier packages offer better performance and more set-up options. All
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Venkatesh and Mahajan reviewed the research on bundle design and pricing in 2009. A 1997 study by Mercer Management Consulting, in Massachusetts stated that good bundles have five elements: (1) the package is worth more than the "sum of its parts" for the consumer; (2) the bundle brings order and
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The most serious home theatre enthusiasts do not typically buy HTIB bundles, as they are a more sophisticated target market. As such, the most serious home cinema-philes typically purchase each component (power amplifiers, speakers, subwoofer cabinet, speaker cables) separately, so that they can
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Help the company sell some unpopular products and speed up inventory clearance. Product bundling combines the best-selling products and unpopular products with less inventory by setting reasonable prices to increase the attractiveness, so that consumers can buy combination products to help the
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enclosure with heavy bracing, a type and size of subwoofer cabinet that would not be found in any HTIB bundle due to its large size and high cost. As well, a serious home theatre enthusiast may wish to have a powered subwoofer with a user-adjustable crossover, a "subsonic" filter and other
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Most firms are multi-product or multi-service companies faced with the decision whether to sell products or services separately at individual prices or whether combinations of products should be marketed in the form of "bundles" for which a "bundle price" is asked. Price bundling plays an
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Help consumers reduce decision-making pressure. Merchants use matching algorithms to set up bundled products that meet the needs of consumers, thereby guiding customers to choose options that meet their needs and reducing their decision fatigue. Bundles have the effect of reducing search
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setup (DVD player, flatscreen TV, surround sound speakers, receiver, subwoofer) for a lower price than if each component were to be purchased separately. The big box electronics store can exploit its economies of scope, as they distribute and sell a huge range of home theatre
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Bundling is often thought of mainly as a value pricing strategy, in that product bundles often cost less than if each item were purchased separately. However, bundling can also have other strategic advantages. For example, when a grocery store is making up a
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elements come into play. A well-off home theatre enthusiast with a very high budget may find a $ 10,000 home theatre package attractive, even if it costs a bit more than buying each item separately, because this is an impressive total cost.
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Consumers appreciate the resulting simplification of the purchase decision and benefit from the joint performance of the combined product or service. This is particularly the case when a non-specialist consumer has
802:, plus "two spelling checkers, two spreadsheets, two communications programs and three versions of BASIC". Stating that year that a computer that weighs 30 pounds "really isn't very portable", 576:(speakers, connection cables, speaker wire). He/she would need to learn about all of the product specifications and the requirements for accessories used with the main items. For example, with 696:
Enable the company to promote more differentiated products with lower marketing costs. The company can spend the same energy and cost to promote two or more products at the same time.
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sales revenue by increasing the average order value, average transaction value, and the amount of each transaction, because multiple products are more expensive than a single product.
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industries, product bundling can be seen as an unfair use of market power because it limits the choices available to the consumer. In these cases it is typically called
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on a new computer is an example of bundled software. For example, as of 2017, most desktop, laptop and mobile computers are bought pre-loaded with various software and
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with close to zero marginal cost, and could enable a bundler with an inferior collection of products to drive even superior quality goods out of the market place.
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When consumers cannot buy certain products individually, they may not buy them because they feel that the bundled sales package forces them to buy more products.
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The high price of current complete bundling, upwards of $ 180–200, along with poor customer service, surprise bills, and technical difficulties, resulted in
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is a subcategory of pure bundling in which a leader product is offered for discount if purchased with a non-leader product, accessory or other item.
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computers discouraged developers from creating other word processing software for the computer. Many companies sold multimedia upgrade kits—a
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choose which items meet their specific movie-watching goals. For example, a serious home theatre enthusiast may wish to have a large cabinet
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was the lead prosecutor. The plaintiffs alleged that Microsoft abused monopoly power on Intel-based personal computers in its handling of
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A 2018 consumer report shows many subscribers are dissatisfied with cable TV, mainly over prices, which has led to many complaints.
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occurs when consumers are offered a choice between purchasing the entire bundle or one of the separate parts of the bundle.
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product and service markets. Industries engaged in the practice include telecommunications services, financial services,
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While many well-known examples of bundling are all products or services from the same store or provider, such as the
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Janiszewski, C., and M. Chuha, Jr. "The Influence of Price Discount Framing on the Evaluation of a Product Bundle".
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Product bundling is most suitable for high volume and high margin (i.e., low marginal cost) products. Research by
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opportunities for competition to pay TV ushered in online video companies and forcing pay TV companies to examine
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operating system. Bundling them together is alleged to have been responsible for Microsoft's victory in the
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Bakos, Yannis; Brynjolfsson, Erik (1999). "Bundling Information Goods: Pricing, Profits, and Efficiency".
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or other electronic device, or is a group of software packages which are sold together. Software which is
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is a subcategory of pure bundling in which the two products are offered together for one bundled price
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was a success was not that it was transportable, but that it came with a pile of bundled software".
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is a variant of leader bundling with the added possibility of buying the leader product on its own.
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apparently has tremendous buying and bargaining power", noting that the Kaypro 10 came with both
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or services for sale as one combined product or service package. It is a common feature in many
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sales. The issue central to the case was whether Microsoft was allowed to bundle its flagship
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Bakos, Yannis; Brynjolfsson, Erik (2000). "Bundling and Competition on the Internet".
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industry often bundles many TV and movie channels into a single tier or package. The
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reporting that these things were the number two most complained about category.
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People Still Don't Like Their Cable Companies, CR's Latest Telecom Survey Finds
1735: 1392: 1250: 1235: 821: 799: 585: 468: 433: 241: 223: 1603:"Bargaining, Bundling, and Clout: The Portfolio Effects of Horizontal Mergers" 1524: 2573: 2433: 2212: 1782: 1743: 1719: 1665: 1657: 1618: 1579: 1532: 894: 593: 552: 540: 330: 298: 1512: 1345: 2357: 2319: 2307: 2282: 1831: 1642:"Consumer Preference for Product Bundles: The Role of Reduced Search Costs" 1282: 1065: 1057: 949: 897:. Some forms of product bundling have been subject to litigation regarding 825: 784:
Early microcomputer companies varied in their decision to bundle software.
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Optimal Bundling: Marketing Strategies for Improving Economic Performance
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History of IBM § 1969: Antitrust, the Unbundling of software and services
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Solomon, Howard. "Corel Inks Office Suite Bundling Deal with PC Chips".
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occurs when a consumer can only purchase the entire bundle or nothing
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described as "a boatload of bundled software"—during the mid-1990s.
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TV rate hikes: Why cable bills are rising again and what can you do
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Average Monthly Cable TV Subscription Bills May Top $ 200 by 2020
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Venkatesh, R. and Vijay Mahajan (2009). Vithala R. Rao (ed.).
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and the two satellite-TV companies —AT&T's DirecTV and
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found that bundling was particularly effective for digital
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Salinger, Michael A. "A Graphical Analysis of Bundling".
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was an exception to widespread consumer dissatisfaction.
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Cable prices have been too damn high for nearly 20 years
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as every Windows user had a copy of Internet Explorer.
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In the 1990s and in the 2000s (decade) and 2010s, many
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is distributed with another product such as a piece of
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TV programing bundles by cable and satellite providers
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electronics store offers all of the components for a
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The Digital Revolution is Disrupting the TV Industry
1858: 1511:Biswas, Indranil; Avittathur, Balram (2018-03-19). 880: 67:. Unsourced material may be challenged and removed. 2037: 1680: 1600: 2101:Fuerderer, R., A. Herrmann, and G. Wuebker, eds. 2087:"Bundling Survey Assesses Consumers' Interests". 2005:Why Cable, Internet and TV Customer Service Sucks 1366: 1319: 754:For software bundled in an operating system, see 2571: 1965:: The Associated Press Published January 5, 2018 1852: 1510: 677: 1803: 1554:Olderog, Torsten; Skiera, Bernd (2000-04-01). 572:when trying to buy all of the components of a 2166: 1906: 1879: 1797: 1757:Pierce, Brooks; Winter, Harold (1996-12-01). 1640:Harris, Judy; Blair, Edward A. (2006-10-01). 1553: 973:The examples and perspective in this article 904: 456:industry combines separate food items into a 385: 1885: 1756: 1104:was rated at the bottom. Internet providers 1646:Journal of the Academy of Marketing Science 1639: 1280: 2173: 2159: 1601:O'Brien, Daniel P.; Shaffer, Greg (2005). 392: 378: 2180: 2122:Ovans, Andrea. "Make a Bundle Bundling". 2043: 1824: 1440:Handbook of Pricing Research in Marketing 1382: 1335: 1011:Learn how and when to remove this message 924:Sections 1 and 2 on May 18, 1998, by the 916:was a set of civil actions filed against 808:concluded that "the main reason that the 353:Enforcement authorities and organizations 127:Learn how and when to remove this message 1717: 841: 1912: 1412: 1410: 14: 2572: 2126:75, no. 6 (1997): 18–20. 1999, S4–S11. 1170:, are also offered by some providers. 2154: 2143:"Utilities Pose Threat to Bundling". 2044:Littleton, Cynthia (August 6, 2019). 1556:"The Benefits of Bundling Strategies" 535:in distribution. This can be seen in 463:A bundle of products may be called a 1691: 1418:"Second-degree price discrimination" 1407: 959: 564:Customer acquisition costs are high. 65:adding citations to reliable sources 36: 2115:Mannes, G. "The Urge to Unbundle". 2089:Security Distributing and Marketing 2058:from the original on August 6, 2019 1859:Zientara, Marguerite (1984-04-02). 1830: 1759:"Pure vs. mixed commodity bundling" 944:(IE) web browser software with its 926:United States Department of Justice 24: 2074: 1724:The Quarterly Journal of Economics 1699:. The American Antitrust Institute 1128:received slightly higher ratings. 1042:went up in January 2018. With the 742:profit of the individual products. 520:Bundling is most successful when: 149: 25: 2616: 2094:"Business Unbundled: Microsoft". 2080:"Bundle Up, Electric Providers". 2017: 1763:Review of Industrial Organization 361:International Competition Network 964: 881:Market power and competitiveness 41: 27:Offering several products as one 2011: 1997: 1982: 1968: 1954: 1940: 1925: 1888:"Macintosh: The Word Explosion" 1750: 1720:"Bundling as an Entry Barrier*" 1711: 1633: 877:higher-cost advanced features. 781:is a form of bundled software. 588:for a car or a grocery store's 52:needs additional citations for 1886:McNeill, Dan (December 1987). 1718:Nalebuff, Barry (2004-02-01). 1594: 1547: 1504: 1478: 1424: 1360: 1313: 1287:Quarterly Journal of Economics 1274: 705:Disadvantages to the consumer: 366:List of competition regulators 13: 1: 1892:Compute!'s Apple Applications 1607:The RAND Journal of Economics 1517:Annals of Operations Research 1267: 1044:Digital television transition 922:Sherman Antitrust Act of 1890 671:Bundling in political economy 2605:Bundled products or services 2110:Journal of Consumer Research 2082:Public Utilities Fortnightly 1560:Schmalenbach Business Review 1490:www.referenceforbusiness.com 1486:"BUNDLED GOODS AND SERVICES" 854:equipment bundles, known as 736:Disadvantages to the seller: 724:Can drive up consumer costs. 678:Advantages and disadvantages 629: 515: 7: 2456:Software release life cycle 2105:. New York: Springer, 1999. 1913:Weksler, Mike (June 1994). 1804:McMahon, Steve (May 1984). 1448:10.4337/9781848447448.00020 1173: 987:, discuss the issue on the 749: 10: 2621: 2524:Software protection dongle 2404:Unwanted software bundling 2112:30, no. 4 (2004): 534–547. 1836:"Top 12 computers of 1984" 1736:10.1162/003355304772839551 1393:10.1287/mksc.19.1.63.15182 913:United States v. Microsoft 906:United States v. Microsoft 761:In the computer industry, 753: 233:Anti-competitive practices 199:Herfindahl–Hirschman index 168:History of competition law 29: 2519:Digital rights management 2509: 2454: 2396: 2345: 2253: 2188: 2140:25, no. 15 (1999): 15–17. 2008:- Retrieved 2018-08-27-06 1525:10.1007/s10479-018-2811-5 1112:received top ratings and 1090:SuddenLink Communications 689:company reduce inventory. 2397:Deceptive and/or illicit 2133:68, no. 1 (1995): 85–98. 1658:10.1177/0092070306288405 1492:. Reference for Business 820:'s inclusion with early 32:Package Deal (TV series) 2549:Software license server 2147:, 28 February 1999, 72. 2124:Harvard Business Review 1346:10.1287/mnsc.45.12.1613 1098:Frontier Communications 790:in 1984 observed that " 719:barrier to market entry 674:enforcement positions. 619:conspicuous consumption 432:bundle might include a 418:imperfectly competitive 2225:Freely redistributable 2084:137, no. 2 (1999): 62. 1861:"Q&A: H.L. Sparks" 1216:Marketing co-operation 1051:cable company packages 899:abuses of market share 756:Pre-installed software 710:Decreases competition. 561:set-up costs are high. 278:Occupational licensing 154: 2600:Software distribution 2388:Software as a service 2182:Software distribution 2098:374, 8407 (2005): 48. 2091:29, no. 1 (1999): 30. 1919:Computer Gaming World 1692:Jonathan, Leibowitz. 1211:Local loop unbundling 1196:Enterprise engagement 1126:Grande Communications 928:(DOJ) and 20 states. 918:Microsoft Corporation 856:Home Theatre in a Box 842:Home theatre in a box 835:Computer Gaming World 832:, speakers, and what 775:software applications 654:Mixed-leader bundling 578:Home Theatre in a Box 570:information asymmetry 153: 2585:Marketing techniques 2479:Software maintenance 2353:Digital distribution 2208:Free and open-source 2131:Journal of Business 1231:Price discrimination 1028:satellite television 993:create a new article 985:improve this article 975:may not represent a 848:consumer electronics 729:price discrimination 603:price discrimination 555:of bundling are low. 537:consumer electronics 442:presentation program 426:consumer electronics 412:is offering several 321:Occupational closure 316:Dividing territories 304:Essential facilities 204:Market concentration 61:improve this article 2484:Software maintainer 2266:Commercial software 2254:Compensation models 850:companies designed 424:, information, and 2595:Product management 2590:Marketing strategy 2544:Software copyright 2534:Product activation 2489:Software publisher 2203:Floating licensing 1915:"CDs On A ROMpage" 1840:Creative Computing 1812:. pp. 206–224 1775:10.1007/BF00174408 1572:10.1007/BF03396614 1323:Management Science 1241:Product management 1094:Atlantic Broadband 1070:Cox Communications 1068:rated better than 805:Creative Computing 533:economies of scope 526:economies of scale 340:Regulatory capture 155: 76:"Product bundling" 2567: 2566: 2559:Torrent poisoning 2474:Long-term support 2298:Pay what you want 2119:91 (2005): 23–24. 1989:Consumer report: 1921:. pp. 36–40. 1834:(December 1984). 1370:Marketing Science 1330:(12): 1613–1630. 1201:Freebie marketing 1191:Compilation album 1168:The Disney Bundle 1021: 1020: 1013: 995:, as appropriate. 946:Microsoft Windows 942:Internet Explorer 767:computer hardware 506:information goods 502:Erik Brynjolfsson 460:or "value meal". 402: 401: 331:Misuse of patents 326:Predatory pricing 311:Exclusive dealing 194:Barriers to entry 182:Coercive monopoly 137: 136: 129: 111: 16:(Redirected from 2612: 2580:Brand management 2373:Product bundling 2346:Delivery methods 2245:Source-available 2175: 2168: 2161: 2152: 2151: 2145:Utility Business 2138:Computing Canada 2068: 2067: 2065: 2063: 2041: 2035: 2034: 2032: 2030: 2015: 2009: 2001: 1995: 1986: 1980: 1972: 1966: 1958: 1952: 1944: 1938: 1929: 1923: 1922: 1910: 1904: 1903: 1901: 1899: 1894:. pp. 54–60 1883: 1877: 1876: 1874: 1872: 1867:. pp. 84–85 1856: 1850: 1849: 1847: 1846: 1828: 1822: 1821: 1819: 1817: 1801: 1795: 1794: 1754: 1748: 1747: 1715: 1709: 1708: 1706: 1704: 1698: 1689: 1678: 1677: 1637: 1631: 1630: 1598: 1592: 1591: 1551: 1545: 1544: 1508: 1502: 1501: 1499: 1497: 1482: 1476: 1475: 1473: 1472: 1466: 1460:. Archived from 1437: 1428: 1422: 1421: 1414: 1405: 1404: 1386: 1364: 1358: 1357: 1339: 1317: 1311: 1310: 1278: 1261:Vaccine bundling 1256:Tying (commerce) 1016: 1009: 1005: 1002: 996: 968: 967: 960: 934:operating system 920:pursuant to the 863:bundles made by 763:bundled software 623:prestige pricing 539:bundles where a 450:cable television 410:product bundling 394: 387: 380: 285:Product bundling 187:Natural monopoly 139: 138: 132: 125: 121: 118: 112: 110: 69: 45: 37: 21: 18:Bundled software 2620: 2619: 2615: 2614: 2613: 2611: 2610: 2609: 2570: 2569: 2568: 2563: 2554:Software patent 2529:License manager 2511:Copy protection 2505: 2450: 2392: 2378:Retail software 2341: 2315:Open-core model 2271:Retail software 2249: 2184: 2179: 2077: 2075:Further reading 2072: 2071: 2061: 2059: 2042: 2038: 2028: 2026: 2016: 2012: 2002: 1998: 1987: 1983: 1973: 1969: 1959: 1955: 1945: 1941: 1930: 1926: 1911: 1907: 1897: 1895: 1884: 1880: 1870: 1868: 1857: 1853: 1844: 1842: 1829: 1825: 1815: 1813: 1806:"The 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Index

Bundled software
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Competition law

History of competition law
Monopoly
oligopoly
Coercive monopoly
Natural monopoly
Barriers to entry
Herfindahl–Hirschman index
Market concentration
Market power
SSNIP test
Relevant market
Merger control
Anti-competitive practices
Monopolization
Collusion

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