1 / 10

Thoughts on Broadband Competition and Product Bundles

Thoughts on Broadband Competition and Product Bundles. Judith Chevalier. Massive Literature on Tying/Bundling. Various motives for tying/bundling Price discrimination Exclusion Product differentiation Rent extraction of value created by a complement

zaria
Télécharger la présentation

Thoughts on Broadband Competition and Product Bundles

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Thoughts on Broadband Competition and Product Bundles Judith Chevalier

  2. Massive Literature on Tying/Bundling • Various motives for tying/bundling • Price discrimination • Exclusion • Product differentiation • Rent extraction of value created by a complement • Tying and/or bundling can be pro-consumer and pro-welfare

  3. Mapping market into models • 1 or 2 providers of Internet access • Competitive providers/substitutes for phone service. • VOIP services/mobile. • 1 or 2 providers of TV services, substitutes for TV services, but not every customer demands TV services. • All items are either independent or complements– synergies in co-production.

  4. Ex:1-Way Essential Complements • Chen and Nalebuff (2009) • Two goods, A is essential and B is dependent • Consumers can enjoy A without B, but can enjoy B only if they buy A. • Example: • Cable Modem Service and IP telephony

  5. Background Intuition: 1WEC • Simple Case, A and B from different firms • All consumers value A at 1 and B at 0.1 • Assume zero cost to produce either A or B Result: division of pie is indeterminate • Any pair of prices that add up to 1.1 with Pb ≤ 0.1 is a Nash Equilibrium. • Case 2, Add heterogeneity to A consumers • Value of A is uniform on [0, 1] and value of B is 0.1 Result: a unique Nash Equilibrium • A charges 1/2, B charges 0.1 Note that B gets all the value it creates • This is true for all values for B up to 1/2

  6. 1 1 1 A&B A&B A&B Pa 0 0 0 λ λ λ Pb Pb Pb Basic Setting: 1WEC Indep. Goods → 1WEC → Fixed Prop. A A Va B Vb

  7. In this model • Monopolist would capture all of the rents through the “essential” product. • Monopolist has incentive to charge low price for B good, driving out rival B’s. (But in this model, consumers don’t mind).

  8. Gaps between model and reality • Can get phone service w/o Internet from ILEC. • Differentiated duopoly not monopoly • If products are differentiated, it is possible for a higher quality competitor good to be driven out by a lower quality good sold by the A incumbent. • Modeled a double play, not a triple play.

  9. What data would we need to look at these issues? • Ideally, P&Q for all bundles. • Maybe AR for customers who take 1,2,3 products. Some questions: • Given the prices charged for bundles and non-bundles, how much would consumers have to value competing VOIP service to buy it? • What customer types effectively face a monopoly? • Want phone but not internet, want internet but not phone, etc.

  10. Lines in US 46% residential 2% business Revenues in Canada 55% residential 20% business Suggestive statistics-cable share of broadband access

More Related