Analyzing the Welfare Impacts of Full-line Forcing Contracts

Justin Ho, Katherine Ho, Julie Holland Mortimer

Research output: Contribution to journalArticle

3 Scopus citations

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 full-line forcing contracts: market coverage, leverage and efficiency. We find that bundling increases market coverage and efficiency, but has little impact on one distributor's gaining leverage over another. As a result, we estimate that full-line forcing contracts increased consumer and producer surplus in this application.

Original languageEnglish (US)
Pages (from-to)468-498
Number of pages31
JournalJournal of Industrial Economics
Volume60
Issue number3
DOIs
StatePublished - Sep 1 2012
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Economics and Econometrics

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