Fighting Bundles: The Effects of Competition on Second-Degree Price Discrimination
American Economic Journal: Microeconomics
vol. 12,
no. 1, February 2020
(pp. 156-87)
Abstract
We study how changes in market structure affect how firms engage in second-degree price discrimination. Specifically, we study how a large incumbent cable firm changes its menu of price-quality offerings and mixed bundles in response to entry. Competition strongly decreases the rate at which prices increase in quality and induces the incumbent to introduce additional medium- to high-quality offerings that the incumbent could have introduced absent competition but chose not to. Our findings are relevant for the broadband industry because they suggest that competition can improve broadband quality through direct pricing effects without any changes in investment in maximum quality.Citation
Boik, Andre, and Hidenori Takahashi. 2020. "Fighting Bundles: The Effects of Competition on Second-Degree Price Discrimination." American Economic Journal: Microeconomics, 12 (1): 156-87. DOI: 10.1257/mic.20180303Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D22 Firm Behavior: Empirical Analysis
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- L13 Oligopoly and Other Imperfect Markets
- L42 Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- L82 Entertainment; Media
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