Research coauthored by BC economist Prof. Julie Holland Mortimer, Katherine Ho and Justin Ho has appeared in the April 2012 issue of the profession's flagship journal, American Economic Review. Their article focuses on firms' use of "bundling", a practice which is at the forefront of many policy debates as new technologies allow firms to implement more complex bundling arrangements. Realistic analyses of bundling--particularly between suppliers and retailers--require detailed data on both supply arrangements and consumer demand. The authors analyze firms' use of bundling as a vertical restraint (known as full-line forcing) using extensive supply and demand data from the video rental industry. Their model captures key details of the market that determine firms' contractual choices, and sheds light on the implications of these decisions. The authors' empirical approach provides a model for how to analyze bundling when detailed data are available.
22 Apr 2012