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Does Service Bundling Reduce Churn?

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  • Jeffrey T. Prince

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Shane Greenstein

    (Department of Management and Strategy, Kellogg School of Management, Northwestern University)

Abstract

We 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.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2011-05-prince-greenstein.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2011-05.

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Date of creation: Nov 2011
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Handle: RePEc:iuk:wpaper:2011-05

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Keywords: Bundle; Service; Churn; Triple Play; Telecommunications; Cable; Broadband; Telephone; Screen;

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Cited by:
  1. 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).
  2. Jeffrey T. Prince & Shane Greenstein, 2013. "Measuring Consumer Preferences for Video Content Provision via Cord-Cutting Behavior," Working Papers 2013-09, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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