Analyzing the Welfare Impacts of Full-Line Forcing Contracts

31 Pages Posted: 6 Nov 2010

See all articles by Justin Ho

Justin Ho

Harvard University

Katherine Ho

Harvard University

Julie H. Mortimer

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

Date Written: August 23, 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 full-line 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.

Keywords: empirical, measurement, vertical, bundling, leverage, efficiency, anti-competitive

Suggested Citation

Ho, Justin and Ho, Katherine and Mortimer, Julie H., Analyzing the Welfare Impacts of Full-Line Forcing Contracts (August 23, 2010). Harvard Institute of Economic Research Discussion Paper No. 2190, Available at SSRN: https://ssrn.com/abstract=1703062

Justin Ho (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Katherine Ho

Harvard University

1875 Cambridge Street
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 )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Harvard University - Department of Economics ( email )

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Cambridge, MA 02138
United States

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