On bundling and entry deterrence

A multiproduct incumbent frm faces the threat of entry from another multiproduct (generalist) frm or from single-product (specialist) frms. Assuming that the incumbent ofers higher quality products than its rivals, we inquire whether the possibility of bundling by the incumbent is more efective in deterring entry in one setting or the other, and explore how the quality diference afects the comparison. For instance, for relatively high-quality diferences the generalist is more vulnerable to bundling than are the specialists; but bundling is a credible action for the incumbent more often against specialists than against the generalist.