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

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

Julie H. Mortimer

Boston College; National Bureau of Economic Research (NBER)

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 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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
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 )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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