The Use of Full-Line Forcing Contracts in the Video Rental Industry
Katherine Ho, Justin Ho, Julie Holland Mortimer
American Economic Review · 2012 · Volume 102 · Issue 2
Abstract
Bundling 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. We 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. Our model captures key details of the market that determine firms' contractual choices, and sheds light on the implications of these decisions. The empirical approach provides a model for how to analyze bundling when detailed data are available. (JEL D86, L14, L81, L82)
Keywords
Economics of Contract: Theory, Transactional Relationships, Contracts and Reputation, Networks, Retail and Wholesale Trade, e-Commerce, Entertainment, Media
Enable JavaScript for citation tools and additional paper interactions.