The Use of Full-Line Forcing Contracts in the Video Rental Industry

44 Pages Posted: 29 Dec 2008 Last revised: 13 May 2021

See all articles by Justin Ho

Justin Ho

Harvard University

Kate Ho

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Julie H. Mortimer

Boston College; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2008

Abstract

We provide an empirical study of bundling in a supply chain, referred to as fullline forcing. We use an extensive dataset on contracts between video retailers and movie distributors to analyze the choices made on both sides of the market: which distributors offer full-line forcing contracts, which retailers take them up, and whether their decisions are profitable. Most large distributors offer full-line forcing contracts in our data. Our simulations indicate that their choices of which contracts to offer are profit-maximizing. However, many retailers prefer to utilize linear pricing contracts even when our model indicates that this may not be profit-maximizing.

Suggested Citation

Ho, Justin and Ho, Kate and Mortimer, Julie H., The Use of Full-Line Forcing Contracts in the Video Rental Industry (December 2008). NBER Working Paper No. w14588, Available at SSRN: https://ssrn.com/abstract=1320834

Justin Ho

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Kate Ho (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Julie H. Mortimer

Boston College ( email )

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Chestnut Hill, MA 02467
United States
617-552-3676 (Phone)

HOME PAGE: http://fmwww.bc.edu/ec/mortimer.php

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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