How "bundling" harms consumers.

By Lewis A. Mettler

Every time products are bundled the following results:

1. The minimum price of the product increases.

2. Choice and selection available to the consumer decreases.

This is true whether the bundling is legal or illegal.

The only exception occurs when the same products are offered separately from the bundle. For example if 98 and IE were both offered separately for $30 and $70 respectfully neither the minimum price is increased (customers can just buy 98 for $30) and the choice and selection is not decreased since three possible choices are available. The choices available on the market are very likely to be much more than three simply because competitors could offer their product in place of either one. (true innovators could actually compete with their offerings)

However, when a monopolist like Microsoft creates a bundle of an operating system and a browser (or any application you want to substitute including bubblegum) the minimum price does in fact go up and choices are reduced. In the 98 case, the price goes from about $30 all the way to $100 to cover the $70 IE product. And, of course choice is reduced since everyone must buy IE and the market is ruined for any competing browser. (same thing would happen with bubblegum... you get their choice of flavor...and the market for any other flavor of gum including mint is ruined)

What is the financial harm in the case with the 98 operating system? About 1.5 billion dollars.

All you have to do is assume that 20 million or so consumers would be required to take the bundle regardless of their preference, multiply that number by the extra $70 tacked onto the product to cover R&D for IE and ....viola.... 1.4 billion dollars. But, of course the bubblegum is free...right?

If you estimate 40 million sales the harm is 2.8 billion. (that is a whole lot of bubblegum someone is going to have to chew)

Lewis A. Mettler, Esq.(Attorney and Software Developer)