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

44 Pages Posted: 14 May 2009 Last revised: 5 May 2010

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 17, 2008

Abstract

We provide an empirical study of bundling in a supply chain, referred to as full-line 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 17, 2008). Harvard Institute of Economic Research Discussion Paper No. 2172, Available at SSRN: https://ssrn.com/abstract=1404706 or http://dx.doi.org/10.2139/ssrn.1404706

Justin Ho

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Kate Ho

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 (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
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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