Fighting Bundles: The Effects of Competition on Second Degree Price Discrimination

35 Pages Posted: 2 Oct 2018

See all articles by Andre Boik

Andre Boik

University of California, Davis - Department of Economics

Hidenori Takahashi

University of Mannheim

Date Written: September 14, 2018

Abstract

We study how changes in market structure affect how firms engage in second degree price discrimination. Specifically, we study how a large incumbent cable firm changes its menu of price-quality offerings and mixed bundles in response to entry. Competition strongly decreases the rate at which prices increase in quality and induces the incumbent to introduce additional medium-to-high quality offerings that the incumbent could have introduced absent competition but chose not to. Our findings are relevant for the broadband industry because they suggest that competition can improve broadband quality through direct pricing effects without any changes in investment in maximum quality.

Keywords: Second degree price discrimination, competition, broadband, cable television

JEL Classification: L1, L42

Suggested Citation

Boik, Andre and Takahashi, Hidenori, Fighting Bundles: The Effects of Competition on Second Degree Price Discrimination (September 14, 2018). Available at SSRN: https://ssrn.com/abstract=3249290 or http://dx.doi.org/10.2139/ssrn.3249290

Andre Boik (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States

Hidenori Takahashi

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

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