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We show how a monopolist in a primary market uses mixed bundling to extract surplus from quality-enhancing investment by a single-product rival in a complementary market, or even force the rival to provide low quality. In our model, bundling does not hinge on commitment ability.Although we assume that bundling creates efficiency gains, we find that bundling reduces consumer surplus and may reduce social welfare, even if the rival is not foreclosed, and investment is not blockaded. Nonetheless, bundling improves welfare when prevents inefficient investment. We propose to check bundled offers via a price test that controls the monopoly component stand-alone price to preserve efficiencies from both bundling and investment. When the rival invests, the test improves consumer surplus and welfare compared with the 'do-nothing' scenario, or a ban on bundling. The test is not consistent with the predatory pricing framework. Qualitative results hold when we endogenize the bundling strategy. JEL codes: L13, L41

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The paper proposes a multi-attribute combinatorial auction-based mechanism, called open contract mechanism (OCM), which allows an organization or an individual (seeker) to dynamically and simultaneously bargain the features of distinct innovation contracts with other organizations and individuals (solvers), in general collective innovation environments. In such contexts, a seeker does not possess specific skills and technical knowledge which are crucial for an innovation or for a part of a new product development project, while some solvers might be willing to provide their relevant know-how to the seeker. To induce collaboration between the seeker and solvers, voluntary and legally enforceable agreements need to be formulated, where a fair evaluation of the intellectual property rights of any party is guaranteed, and all technical and economic aspects are detailed. Therefore, OCM allows the seeker to involve solvers in defining a collection of open contract schemes, related to the supply of the required specific skills and technical knowledge. The solvers must submit offers in terms of contract versions of these contract schemes. In such a way, OCM aims at partially extracting from the solvers their multidimensional private information regarding economic and technical issues, in order to reduce the occurrences of pre- and post-contractual opportunistic behaviours. © 2012 Springer-Verlag Berlin Heidelberg

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