Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play

36 Pages Posted: 7 Oct 2013  

Joao Carlos Macieira

Virginia Polytechnic Institute & State University - Department of Economics

Pedro Pereira

Autoridade da Concorrência

Joao Vareda

Autoridade da Concorrência

Date Written: October 1, 2013

Abstract

We analyze firms’ incentives to bundle and tie in the telecommunications industry. As a first step, we develop a discrete-choice demand model where firms sell products that may combine several services in bundles, and consumers choose assortments of different types of products available from various vendors. Our approach extends standard discrete-choice demand models of differentiated product to allow for both flexible substitution patterns and to map demand for each choice alternative onto the demand for each service or bundle that a firm may sell. We exploit these properties to examine bundling behavior when firms choose: (i) prices, and (ii) which products to sell. Using consumer-level data and survey data from the Portuguese telecommunications industry, we estimate our demand model and identify firm incentives to bundle and tie in this industry. We use the model to perform several policy related conterfactuals and evaluate their impact on prices and product provision.

Keywords: Bundles, Discrete-Choice Model, Equilibrium Simulation, Differentiated Product, Consumer Level Data

JEL Classification: D43, K21, L44, L96

Suggested Citation

Macieira, Joao Carlos and Pereira, Pedro and Vareda, Joao, Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play (October 1, 2013). NET Institute Working Paper No. 13-15. Available at SSRN: https://ssrn.com/abstract=2335748 or http://dx.doi.org/10.2139/ssrn.2335748

Joao Carlos Macieira (Contact Author)

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States
15402317353 (Phone)

Pedro Pereira

Autoridade da Concorrência ( email )

1050-138 Lisboa
Portugal

Joao Vareda

Autoridade da Concorrência ( email )

1050-138 Lisboa
Portugal

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