Does Service Bundling Reduce Churn?
AbstractWe examine whether bundling in telecommunications services reduces churn using a series of large, independent cross sections of household decisions. To identify the effect of bundling, we construct a pseudo-panel dataset and utilize a linear, dynamic panel-data model, supplemented by nearest-neighbor matching. We find bundling does reduce churn for all three "triple-play" services. However, the effect is only "visible" during times of turbulent demand. We also find evidence that broadband was substituting for pay television in 2009. This analysis highlights that bundling helps with customer retention in service industries, and may play an important role in preserving contracting markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2011-05.
Date of creation: Nov 2011
Date of revision:
Contact details of provider:
Postal: 1309 East Tenth Street, Room 451, Bloomington, IN 47405-1701
Web page: http://www.bus.indiana.edu/bepp/
More information through EDIRC
Bundle; Service; Churn; Triple Play; Telecommunications; Cable; Broadband; Telephone; Screen;
Find related papers by JEL classification:
- L0 - Industrial Organization - - General
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
- Jeffrey T. Prince, 2008. "Repeat Purchase amid Rapid Quality Improvement: Structural Estimation of Demand for Personal Computers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 1-33, 03.
- 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.
- Crawford, Gregory, 2005. "The Discriminatory Incentives to Bundle in the Cable Television Industry," Working paper 303, Regulation2point0.
- Dolores Collado, M., 1997. "Estimating dynamic models from time series of independent cross-sections," Journal of Econometrics, Elsevier, vol. 82(1), pages 37-62.
- Schmalensee, Richard, 1982. "Commodity Bundling by Single-Product Monopolies," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 67-71, April.
- Rosston Gregory L. & Savage Scott J & Waldman Donald M, 2010. "Household Demand for Broadband Internet in 2010," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-45, September.
- Verbeek, Marno & Vella, Francis, 2005.
"Estimating dynamic models from repeated cross-sections,"
Journal of Econometrics,
Elsevier, vol. 127(1), pages 83-102, July.
- Verbeek, M.J.C.M. & Vella, F., 2002. "Estimating dynamic models from repeated cross-sections," Econometric Institute Report EI 2002-05, Erasmus University Rotterdam, Econometric Institute.
- Verbeek, M.J.C.M. & Vella, F., 2000. "Estimating Dynamic Models from Repeated Cross-Sections," Discussion Paper 2000-25, Tilburg University, Center for Economic Research.
- Cuesta, Jose & Nopo, Hugo & Pizzolitto, Georgina, 2011.
"Using Pseudo-Panels to Measure Income Mobility in Latin America,"
IZA Discussion Papers
5449, Institute for the Study of Labor (IZA).
- Jose Cuesta & Hugo Ñopo & Georgina Pizzolitto, 2011. "Using Pseudo‐Panels To Measure Income Mobility In Latin America," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(2), pages 224-246, 06.
- Hugo Ñopo & Giorgina Pizzolitto & José Cuesta, 2007. "Using Pseudo-Panels to Measure Income Mobility in Latin America," Research Department Publications 4557, Inter-American Development Bank, Research Department.
- Whinston, Michael D, 1990.
"Tying, Foreclosure, and Exclusion,"
American Economic Review,
American Economic Association, vol. 80(4), pages 837-59, September.
- Seung‐Hyun Hong, 2013. "Measuring The Effect Of Napster On Recorded Music Sales: Difference‐In‐Differences Estimates Under Compositional Changes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(2), pages 297-324, 03.
- Joseph Farrell & Carl Shapiro, 1988.
"Dynamic Competition with Switching Costs,"
RAND Journal of Economics,
The RAND Corporation, vol. 19(1), pages 123-137, Spring.
- Farrell, Joseph & Shapiro, Carl, 1988. "Dynamic Competition with Switching Costs," Department of Economics, Working Paper Series qt1h02g9q4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Joseph Farrell and Carl Shapiro., 1988. "Dynamic Competition with Switching Costs," Economics Working Papers 8865, University of California at Berkeley.
- Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February.
- Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LP, vol. 4(3), pages 290-311, September.
- Salinger, Michael A, 1995. "A Graphical Analysis of Bundling," The Journal of Business, University of Chicago Press, vol. 68(1), pages 85-98, January.
- McKenzie, D.J.David J., 2004. "Asymptotic theory for heterogeneous dynamic pseudo-panels," Journal of Econometrics, Elsevier, vol. 120(2), pages 235-262, June.
- Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 283-98, March.
- Yannis Bakos & Erik Brynjolfsson, 1997.
"Bundling Information Goods: Pricing, Profits and Efficiency,"
Working Paper Series
199, MIT Center for Coordination Science.
- Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
- Jay Pil Choi, 2004. "Tying and innovation: A dynamic analysis of tying arrangements," Economic Journal, Royal Economic Society, vol. 114(492), pages 83-101, 01.
- Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
- Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
- Shane Greenstein & Ryan C. McDevitt, 2010.
"Evidence of a Modest Price Decline in US Broadband Services,"
NBER Working Papers
16166, National Bureau of Economic Research, Inc.
- Greenstein, Shane & McDevitt, Ryan, 2011. "Evidence of a modest price decline in US broadband services," Information Economics and Policy, Elsevier, vol. 23(2), pages 200-211, June.
- Evans, Lewis & Greenstein, Shane, 2010. "Evidence of a Modest Price Decline in U.S. Broadband Services," Working paper 609, Regulation2point0.
- Moffitt, Robert, 1993. "Identification and estimation of dynamic models with a time series of repeated cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 99-123, September.
- McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
- Chen, Yongmin, 1997. "Equilibrium Product Bundling," The Journal of Business, University of Chicago Press, vol. 70(1), pages 85-103, January.
- Calzada, Joan & Martínez, Fernando, 2012.
"Broadband prices in the European Union: Competition and commercial strategies,"
23rd European Regional ITS Conference, Vienna 2012
60382, International Telecommunications Society (ITS).
- Joan Calzada & Fernando Martínez, 2013. "“Broadband prices in the European Union: competition and commercial strategies”," IREA Working Papers 201309, University of Barcelona, Research Institute of Applied Economics, revised May 2013.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rick Harbaugh).
If references are entirely missing, you can add them using this form.