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Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play

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Author Info

  • Joao Macieira

    ()
    (Department of Economics, Virginia Tech)

  • Pedro Pereira

    ()
    (Autoridade da Concorrencia and Centro de Estudos e Formacao Avancada em Gestao e Economia, Universidade de Evora)

  • Joao Vareda

    ()
    (Autoridade da Concorrencia and Centro de Estudos e Formacao Avancada em Gestao e Economia, Universidade de Evora)

Abstract

We analyze firms' incentives to bundle and tie in the telecommunications industry. As a first step, we develop a discrete-choice demand model where firms sell products that may combine several services in bundles, and consumers choose assortments of different types of products available from various vendors. Our approach extends standard discrete-choice demand models of differentiated product to allow for both flexible substitution patterns and to map demand for each choice alternative onto the demand for each service or bundle that a firm may sell. We exploit these properties to examine bundling behavior when firms choose: (i) prices, and (ii) which products to sell. Using consumer-level data and survey data from the Portuguese telecommunications industry, we estimate our demand model and identify firm incentives to bundle and tie in this industry. We use the model to perform several policy related conterfactuals and evaluate their impact on prices and product provision.

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File URL: http://www.netinst.org/Macieira_Pereira_13-15.pdf
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Bibliographic Info

Paper provided by NET Institute in its series Working Papers with number 13-15.

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Length: 36 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:net:wpaper:1315

Note: We gratefully acknowledge the financial support from the NET Institute (www.netinst.org). We thank J. Prieger and J. Williams for useful comments. The opinions expressed in this article reflect only the authors' views and in no way bind the institutions to which they are affiliated.
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Web page: http://www.NETinst.org/

Related research

Keywords: Bundles; Discrete-Choice Model; Equilibrium Simulation; Differentiated Product; Consumer Level Data.;

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