A general equilibrium analysis on impersonal networking decisions, e-commerce, and bundling pricing

Abstract

This paper constructs a Walrasian equilibrium model based on impersonal networking decision to explore one of the typical phenomenon in e-Commerce market, Bundling Pricing. It departures from the other models of bundling and tying by allowing substitution between goods, flexible quantities of goods, re-sale of any goods, competitive market, and ex-ante identical utility function for all individuals. It shows that the function of bundling sale in a competitive market is to get intangible information goods involved in the division of labor and commercialised production, meanwhile avoiding direct pricing of such goods, thereby promoting division of labor and aggregate productivity. According to this theory of bundling, bundling in a competitive market is Pareto efficient and it plays a very important role to utilize positive network effects of division of labor on aggregate productivity. Antitrust prosecution should pay more attention to the intention of blocking free entry rather than bundling itself. © Springer-Verlag Berlin Heidelberg 2004.