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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | The discriminatory incentives to bundle in the cable television industry |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Quantitative Marketing and Economics |
| Publisher | Springer |
| Geographical Reach | international |
| ISSN | 1570-7156 |
| Volume | 6 |
| Number | 1 |
| Page Range | 41 - 78 |
| Date | 2008 |
| Abstract Text | An influential theoretical literature supports a discriminatory explanation for product bundling: it reduces consumer heterogeneity, extracting surplus in a manner similar to second-degree price discrimination. This paper tests this theory and quantifies its importance in the cable television industry. The results provide qualified support for the theory. While bundling of general-interest cable networks is estimated to have no discriminatory effect, bundling an average top-15 special-interest cable network significantly increases the estimated elasticity of cable demand. Calibrating these results to a simple model of bundle demand with normally distributed tastes suggests that such bundling yields a heterogeneity reduction equal to a 4.7% increase in firm profits (and 4.0% reduction in consumers surplus). The results are robust to alternative explanations for bundling. |
| Digital Object Identifier | 10.1007/s11129-007-9031-7 |
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| Keywords | Marketing, economics, econometrics and finance (miscellaneous), bundling, price discrimination, cable television |