Bundle-Size Pricing as an Approximation to Mixed Bundling

Chu, Chenghuan Sean; Leslie, Phillip; Sorensen, Alan

doi:10.1257/aer.101.1.263

Cited by 143 publications

(106 citation statements)

References 31 publications

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“…This outcome of the study was consistent with the existing literature, e.g. Chu, Leslie & Sorenson (2011), but nevertheless came as a small surprise.…”

Section: Profitsupporting

confidence: 91%

“…Indeed, regulations to cap market share or impose à la carte on cable operators may reduce producer profits, and absent offsetting increases in consumer welfare, such policy measures may reduce total welfare (Adilov, Alexander & Cunningham, 2012). Moreover, bundle form also affects the levels of profit and welfare achievable, and these may vary depending upon the form of the distributions of consumers' willingness-to-pay for each of the components in the bundle, and the joint distributions of demand for any two or more of them (Chu, Leslie & Sorenson, 2011;Chen & Riordan, 2013).…”

Section: A Quick Trip Through Bundling Theorymentioning

confidence: 99%

“…Thus, simulations and numerical analysis offer perhaps the best means of assessing the likely effects of different demand distributions and bundling strategies for larger numbers of products. Chu, Leslie & Sorenson (2011) use this approach to explore the effects of consumer valuations distributed according to five parametric families -exponential, logit, lognormal, normal and uniform -across a wide range of parameter values and various numbers of goods. However, they observe that even with high levels of low-cost modern computational power, the transaction costs of calculating optimal prices for the pricing policy most likely to lead to highest profits -MB -are extremely high.…”

Section: A Quick Trip Through Bundling Theorymentioning

confidence: 99%

See 2 more Smart Citations

Competition and Vertical/Agglomeration Effects in Media Mergers: Bagging Bundle Benefits

Howell

Potgieter

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractExisting frameworks (such as used by the New Zealand Commerce Commission in its recent evaluation of the proposed merger between Sky Television and Vodafone) require, as a first step, the definition of the relevant markets affected by the merger or vertical integration activity. Historic precedents in the telecommunications sector have tended towards finding that vertical agglomeration effects when network operators integrate downstream into the provision of applications and services to end-consumers are harmful to competition.Such Structure-Conduct-Performance methods of evaluating mergers and other aspects of market performance are problematic when the firm(s) concerned supply many different products, both together in various different bundle forms and separately as individual components. Defining the markets for (merger) analysis on the basis of only one of the components in a possible bundle that the (merged) firm may supply risks overlooking the complex interactions that occur on the demand side when consumers make their purchase decisions.This is especially likely to be an issue in the supply of internet applications and content bundled with broadband internet access. Consumers have heterogeneous preferences for different applications and content (hereafter 'content'), and will purchase (or access) many different content types. Even though ownership of rights to distribute one content may confer a degree of market power in for the owner-provider over those consumers with very strong preferences for this content over all others, it is not axiomatic that the firm will be able to exert this power over consumers whose preferences are more evenly distributed. The more variety there is in the content bundles available, and the more heterogeneous are consumers' preferences across the various content types, the greater is the number of possible markets in which interaction is likely to occur and the more problematic it becomes to identify the relevant markets for analysis of mergers and antitrust cases.We propose that classic merger and antitrust analysis based on econometric cost-benefit analysis can be augmented by using simulation and numerical analysis of a range of bundle offers expected to be relevant in decision-making. We develop a simple model and use it to demonstrate how this approach could have informed the recent New Zealand Commerce Commission decision about the proposed Sky-Vodafone merger by offering some ...

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“…This outcome of the study was consistent with the existing literature, e.g. Chu, Leslie & Sorenson (2011), but nevertheless came as a small surprise.…”

Section: Profitsupporting

confidence: 91%

Section: A Quick Trip Through Bundling Theorymentioning

confidence: 99%

Section: A Quick Trip Through Bundling Theorymentioning

confidence: 99%

See 1 more Smart Citation

Competition and Vertical/Agglomeration Effects in Media Mergers: Bagging Bundle Benefits

Howell

Potgieter

2017

SSRN Journal

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show abstract

“…In style our paper is close to Chu, Leslie and Sorensen (2011), who combine theory, simulations and empirics to argue that bundle-size pricing is a good approximation to the optimal mixed bundling pricing scheme for a monopolist selling multiple goods. Finally from an empirical perspective, our paper contributes to the growing literature on online advertising and optimal pricing.…”

Section: −F (V)mentioning

confidence: 76%

Buy-it-now or Take-a-chance: Price Discrimination through Randomized Auctions

Celis

Lewis

Möbius

et al. 2012

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Increasingly detailed consumer information makes sophisticated price discrimination possible. At fine levels of aggregation, demand may not obey standard regularity conditions. We propose a new randomized sales mechanism for such environments. Bidders can "buy-it-now" at a posted price, or "take-a-chance" in an auction where the top d > 1 bidders are equally likely to win. The randomized allocation incentivizes high valuation bidders to buy-it-now. We analyze equilibrium behavior, and apply our analysis to advertiser bidding data from Microsoft Advertising Exchange. In counterfactual simulations, our mechanism increases revenue by 4.4% and consumer surplus by 14.5% compared to an optimal second-price auction.

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“…The Japanese government unbundles only the NTT's lines and does not regulate other lines. 15 Therefore, the regulation is asymmetric.…”

Section: Fiber Technology and The Market Structurementioning

confidence: 99%

Natural Monopoly and Distorted Competition: Evidence from Unbundling Fiber-Optic Networks

Minamihashi

2012

SSRN Journal

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Bundle-Size Pricing as an Approximation to Mixed Bundling

Cited by 143 publications

References 31 publications

Competition and Vertical/Agglomeration Effects in Media Mergers: Bagging Bundle Benefits

Competition and Vertical/Agglomeration Effects in Media Mergers: Bagging Bundle Benefits

Buy-it-now or Take-a-chance: Price Discrimination through Randomized Auctions

Natural Monopoly and Distorted Competition: Evidence from Unbundling Fiber-Optic Networks

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