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Does Service Bundling Reduce Churn?

  • 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)

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://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2011-05-prince-greenstein.pdf
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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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