We examine the importance of office suites for the evolution of the PC office software market in the 1990s. An estimated discrete demand choice model reveals strong positive correlation of consumer values for spreadsheets and word-processors, a bonus value for suites, and advantages for Microsoft products. We employ the estimates to simulate various hypothetical market structures to shed light on the welfare and competitive effects of suites under alternative correlation assumptions. We find that greater correlation enhances the profitability of bundling due to the interaction of a market expansion effect and a suite bonus effect. In a market setting in which Lotus sells only a spreadsheet and WordPerfect sells only a word processor, we find that Microsoft’s introduction of the suite increased consumer welfare. Furthermore, while the Lotus and WordPerfect suites gained little market acceptance, a merger of the two might have enhanced competition considerably.
|Original language||English (US)|
|Number of pages||49|
|State||Published - Mar 2013|