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The Role of Upstream-Downstream Competition on Bundling Decisions: Should Regulators Force Firms to Unbundle?

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  • Adam D. Rennhoff
  • Konstantinos Serfes

Abstract

"We develop an upstream-downstream model to analyze downstream firms' incentives to bundle. In our framework, the upstream firms are content providers (such as television stations) and the downstream firms are system operators (such as cable/satellite operators). We show that an a la carte regulation (i.e., a regulation that forces downstream firms to unbundle) leads to higher consumer surplus, if the unregulated equilibrium exhibits pure bundling (PB). Hence, our model predicts that in the television industry, which is mainly characterized by PB, an a la carte regulation will be beneficial for the consumers. If, on the other hand, the unregulated equilibrium is characterized by mixed bundling, then an a la carte regulation will increase consumer welfare provided that demand for multiple purchases is strong." Copyright (c) 2009, The Author(s) Journal Compilation (c) 2009 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 18 (2009)
Issue (Month): 2 (06)
Pages: 547-588

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Handle: RePEc:bla:jemstr:v:18:y:2009:i:2:p:547-588

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Cited by:
  1. Crawford, Gregory S & Yurukoglu, Ali, 2011. "The Welfare Effects of Bundling in Multichannel Television Markets," CEPR Discussion Papers 8370, C.E.P.R. Discussion Papers.
  2. Akifumi Ishihara & Noriyuki Yanagawa, 2013. "Dark Sides of Patent Pools with Compulsory Independent Licensing," CARF F-Series CARF-F-318, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  3. Gregory Crawford, 2008. "The discriminatory incentives to bundle in the cable television industry," Quantitative Marketing and Economics, Springer, vol. 6(1), pages 41-78, March.
  4. Leslie Marx, 2006. "Economics at the Federal Communications Commission," Review of Industrial Organization, Springer, vol. 29(4), pages 349-368, December.
  5. Anja Lambrecht & Katja Seim & Naufel Vilcassim & Amar Cheema & Yuxin Chen & Gregory Crawford & Kartik Hosanagar & Raghuram Iyengar & Oded Koenigsberg & Robin Lee & Eugenio Miravete & Ozge Sahin, 2012. "Price discrimination in service industries," Marketing Letters, Springer, vol. 23(2), pages 423-438, June.

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