The discriminatory incentives to bundle in the cable television industry
Crawford, Gregory S.. (2008) The discriminatory incentives to bundle in the cable television industry. Quantitative Marketing and Economics, Vol.6 (No.1). pp. 41-78. ISSN 1570-7156Full text not available from this repository.
Official URL: http://dx.doi.org/10.1007/s11129-007-9031-7
An influential theoretical literature supports a discriminatory explanation for product bundling: it reduces consumer heterogeneity, extracting surplus in a manner similar to second-degree price discrimination. This paper tests this theory and quantifies its importance in the cable television industry. The results provide qualified support for the theory. While bundling of general-interest cable networks is estimated to have no discriminatory effect, bundling an average top-15 special-interest cable network significantly increases the estimated elasticity of cable demand. Calibrating these results to a simple model of bundle demand with normally distributed tastes suggests that such bundling yields a heterogeneity reduction equal to a 4.7% increase in firm profits (and 4.0% reduction in consumers surplus). The results are robust to alternative explanations for bundling.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Journal or Publication Title:||Quantitative Marketing and Economics|
|Publisher:||Springer New York LLC|
|Number of Pages:||38|
|Page Range:||pp. 41-78|
|Access rights to Published version:||Restricted or Subscription Access|
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