En collaboration avec Sébastien Galanti
While brokers could formerly provide brokerage and financial research as a single package, unbundling rules now oblige them to charge separately for the two services. To analyse the effect of this regulation, we consider a duopoly between a broker and an independent research provider and two types of services: a brokerage service and two different research services, which cannot be consumed without the brokerage service. Without unbundling rules, there exists an equilibrium in which the broker offers a bundle of brokerage and a research service while the independent analyst provides the other research service alone. This equilibrium is based on a differentiation effect, whereby the demand for the bundle boosts the demand for the separated component and vice versa. Under unbundling rules, another equilibrium emerges in which the broker offers the brokerage and one research service separately while the independent analyst offers the second research service. In this equilibrium, the market power of both protagonists and their profits are increased and welfare is improved.