Does Bundling Decrease the Probability of Switching Telecommunications Service Providers?

30 Pages Posted: 16 Aug 2017 Last revised: 29 Nov 2018

See all articles by Stephanie Lee

Stephanie Lee

University of Washington - Michael G. Foster School of Business

Date Written: June 29, 2016

Abstract

I examine whether bundling of telecommunications services makes individuals less likely to switch their service provider because of increased switching costs. Using a detailed survey dataset from the Korea Information Society Development Institute (KISDI), I find that Internet subscribers who previously bundled are less likely to switch their Internet service provider than are those who did not bundle. The results are robust to correction for the potential selection problem through the use of an endogenous treatment model. The finding that bundling reduces the probability of switching service providers and locks-in existing users can have important implications for market competitiveness and consumer welfare.

Keywords: Bundling, Switching costs, Telecommunications

JEL Classification: L10, L86

Suggested Citation

Lee, Stephanie, Does Bundling Decrease the Probability of Switching Telecommunications Service Providers? (June 29, 2016). Review of Industrial Organization, Vol. 50, No. 3, 2017. Available at SSRN: https://ssrn.com/abstract=3014978

Stephanie Lee (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

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