Does Bundling Decrease the Probability of Switching Telecommunications Service Providers?
30 Pages Posted: 16 Aug 2017 Last revised: 29 Nov 2018
Date Written: June 29, 2016
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: Suggested Citation