We thank Richard Mortimer, the Editor and three anonymous referees for helpful comments. The data for this study were generously provided to us by Rentrak Corporation. Any remaining errors are our own.
Analyzing the Welfare Impacts of Full-line Forcing Contracts†
Article first published online: 17 OCT 2012
© 2012 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 60, Issue 3, pages 468–498, September 2012
How to Cite
Ho, J., Ho, K. and Holland Mortimer, J. (2012), Analyzing the Welfare Impacts of Full-line Forcing Contracts. The Journal of Industrial Economics, 60: 468–498. doi: 10.1111/j.1467-6451.2012.00489.x
- Issue published online: 17 OCT 2012
- Article first published online: 17 OCT 2012
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 full-line forcing contracts: market coverage, leverage and efficiency. We find that bundling increases market coverage and efficiency, but has little impact on one distributor's gaining leverage over another. As a result, we estimate that full-line forcing contracts increased consumer and producer surplus in this application.