| Abstract: | This paper presents a model of inter-market competition through bundling wherein each firm has a cost advantage in a different market and competes against fringe firms. Without cost saving through bundling, there is no equilibrium in which the bundled good is provided. However, with cost saving through bundling, there exist equilibria in which one firm provides bundling and the other does not. In this case, bundling can be used as a device for entry deterrence. Finally, we illustrate that bundling can reduce social welfare by discouraging the efficient entrant from entering the market. |
