Buy custom Bundling Effects on Welfare in the Pay TV Market
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Miscellaneous
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| Number of pages / Number of words: |
30 / 8298 |
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In the multi-product case, theory is ambiguous: under-provision due to non-appropriability is still a problem, but if products are substitutes, monopoly pricing on one good may increase demand for a second enough to encourage its (inefficient) offering. In this (multi-product) case, bundling can also influence the calculus of product choice...
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Because bundling aggregates preferences for bundle components, it makes tastes more homogenous, increasing the elasticity of demand ([Bakos and Brynjolfsson, 1999] and [Crawford, 2006]). If marginal costs for bundle components are zero, Bakos and Brynjolfsson (1999) show that as bundle size increases without bound, the product choice problem is solved; bundle profit converges to total surplus and both the monopolist and social planner will offer the same portfolio of goods...
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