Exclusionary Bundle Discounts: A Simple Model with two Applications

Abstract

We develop a simple theoretical model of exclusionary bundle discounts. Based on the model, we develop a screening test for exclusionary bundle discounts. This test only requires knowledge of prices and an estimate of the coverage of the bundle discount. We apply this test to the Vodafone/Liberty Global merger in Germany and find bundle discounts in the German broadband Internet access market consistent with exclusion. We finally use the model to simulate the merger's price effects.