Analyzing the Welfare Impacts of Full-line Forcing Contracts

Justin Ho, Katherine Ho, Julie Holland Mortimer

NBER Working Paper No. 16318
Issued in August 2010
NBER Program(s):   IO

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.

Published: Justin Ho & Katherine Ho & Julie Holland Mortimer, 2012. "Analyzing the Welfare Impacts of Full-line Forcing Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 60(3), pages 468-498, 09.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX