Bundling with Resale*

Abstract

How does resale affect multiproduct bundling? I investigate using a model of monopoly bundling with costly resale. Consumers purchase in the primary market while anticipating resale, then participate in a resale market with market-clearing prices. Resale forces the monopolist to balance the additional profit from a discounted bundle against the opportunity for consumer arbitrage. In equilibrium, the monopolist may still offer a discounted bundle, but resale reduces the returns to bundling and has an ambiguous effect on consumer and total welfare. When consumers have heterogeneous costs of resale, it is possible for consumers to resell in equilibrium.