@techreport{NBERw16321, title = "Bundling Among Rivals: A Case of Pharmaceutical Cocktails", author = "Claudio Lucarelli and Sean Nicholson and Minjae Song", institution = "National Bureau of Economic Research", type = "Working Paper", series = "Working Paper Series", number = "16321", year = "2010", month = "August", doi = {10.3386/w16321}, URL = "http://www.nber.org/papers/w16321", abstract = {We empirically analyze the welfare effects of cross-firm bundling in the pharmaceutical industry. Physicians often treat patients with "cocktail" regimens that combine two or more drugs. Firms cannot price discriminate because each drug is produced by a different firm and a physician creates the bundle in her office from the component drugs. We show that a less competitive equilibrium arises with cocktail products because firms can internalize partially the externality their pricing decisions impose on competitors. The incremental profits from creating a bundle are sometimes as large as the incremental profits from a merger of the same two firms.}, }