Working Paper: NBER ID: w14588
Authors: Justin Ho; Katherine Ho; Julie Holland Mortimer
Abstract: We provide an empirical study of bundling in a supply chain, referred to as fullline forcing. We use an extensive dataset on contracts between video retailers and movie distributors to analyze the choices made on both sides of the market: which distributors offer full-line forcing contracts, which retailers take them up, and whether their decisions are profitable. Most large distributors offer full-line forcing contracts in our data. Our simulations indicate that their choices of which contracts to offer are profit-maximizing. However, many retailers prefer to utilize linear pricing contracts even when our model indicates that this may not be profit-maximizing.
Keywords: No keywords provided
JEL Codes: L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Full-line forcing contracts (D86) | Distributor profits (D39) |
| Distributor offering FLF contracts (L14) | Retailer uptake (L81) |
| Full-line forcing contracts (D86) | Retailer inventory levels (L81) |
| Retailer inventory levels (L81) | Retailer profits (L81) |
| Full-line forcing contracts (D86) | Retailer revenues (L81) |
| Distributor incurs losses on average from FLF contracts when retailers do not take them (L14) | Distributor profits (D39) |