Bundling and nonlinear pricing in telecommunications
In: The Rand journal of economics, Band 54, Heft 2, S. 268-298
ISSN: 1756-2171
AbstractI develop a multiproduct nonlinear pricing model where a firm sells both discrete and continuous services to consumers with multidimensional heterogeneity. I derive the optimal selling mechanism and provide primitive conditions under which different bundling strategies arise. Exploiting both the firm and the consumer's optimality conditions, I show that the model structure is nonparametrically identified and propose a semiparametric estimation procedure. An application to China Telecom data shows that mixed bundling of internet and landline phone services is more beneficial to both the firm and the consumer relative to component pricing.