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Analyzing the Welfare Impacts of Full-line Forcing Contracts

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  • Justin Ho
  • Katherine Ho
  • Julie Holland Mortimer

Abstract

Theoretical investigations have examined both anti-competitive and efficiency-inducing rationales for vertical bundling, making empirical evidence important to understanding its welfare implications. We use an extensive dataset on full-line forcing contracts between movie distributors and video retailers to empirically measure the impact of vertical bundling on welfare. We identify and measure three primary effects of fullline forcing contracts: market coverage, leverage, and efficiency. We find that bundling increases market coverage and efficiency, but has little impact on one distributor gaining leverage over another. As a result, we estimate that full-line forcing contracts increased consumer and producer surplus in this application.

Suggested Citation

  • Justin Ho & Katherine Ho & Julie Holland Mortimer, 2010. "Analyzing the Welfare Impacts of Full-line Forcing Contracts," NBER Working Papers 16318, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16318 Note: IO
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    1. Simon Kuznets, 1934. "National Income, 1929-1932," NBER Books, National Bureau of Economic Research, Inc, number kuzn34-1.
    2. Johnson, Simon & Larson, William & Papageorgiou, Chris & Subramanian, Arvind, 2013. "Is newer better? Penn World Table Revisions and their impact on growth estimates," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 255-274.
    3. Sutton, Paul C. & Costanza, Robert, 2002. "Global estimates of market and non-market values derived from nighttime satellite imagery, land cover, and ecosystem service valuation," Ecological Economics, Elsevier, vol. 41(3), pages 509-527, June.
    4. J. Vernon Henderson & Adam Storeygard & David N. Weil, 2012. "Measuring Economic Growth from Outer Space," American Economic Review, American Economic Association, vol. 102(2), pages 994-1028, April.
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    Cited by:

    1. Katherine Ho & Justin Ho & Julie Holland Mortimer, 2012. "The Use of Full-Line Forcing Contracts in the Video Rental Industry," American Economic Review, American Economic Association, vol. 102(2), pages 686-719, April.

    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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