Analyzing the Welfare Impacts of Full-Line Forcing Contracts

31 Pages Posted: 30 Aug 2010 Last revised: 4 Aug 2021

See all articles by Justin Ho

Justin Ho

Dean & Company

Kate Ho

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

Julie H. Mortimer

Boston College; National Bureau of Economic Research (NBER); Harvard University - Department of Economics

Date Written: August 2010

Abstract

Theoretical investigations have examined both anti-competitive and efficiency-inducing rationales for vertical bundling, making empirical evidence important to understanding its welfare implications. We use an extensive dataset on full-line forcing contracts between movie distributors and video retailers to empirically measure the impact of vertical bundling on welfare. We identify and measure three primary effects of fullline forcing contracts: market coverage, leverage, and efficiency. We find that bundling increases market coverage and efficiency, but has little impact on one distributor gaining leverage over another. As a result, we estimate that full-line forcing contracts increased consumer and producer surplus in this application.

Suggested Citation

Ho, Justin and Ho, Kate and Mortimer, Julie H., Analyzing the Welfare Impacts of Full-Line Forcing Contracts (August 2010). NBER Working Paper No. w16318, Available at SSRN: https://ssrn.com/abstract=1667349

Justin Ho

Dean & Company ( email )

8065 Leesburg Pike, Suite 500
Vienna, VA 22182
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

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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United States

Harvard University - Department of Economics ( email )

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United States

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