Bundling and Nonlinear Pricing in Telecommunications

Yao Luo
2018 Social Science Research Network  
This paper studies bundling and price discrimination by a multiproduct firm selling internet and phone services in an imperfect information setting. I derive the optimal selling mechanism, and provide primitive conditions under which different bundling strategies arise, such as component pricing, pure bundling, semi-mixed bundling and mixed bundling. I show that the model structure is nonparametrically identified. I then propose a three-step semiparametric estimation procedure involving a new
more » ... gression spline estimator under both monotonicity and bound restrictions. An illustration on China Telecom data shows that mixed bundling is beneficial to both the firm and the consumer relative to component pricing.
doi:10.2139/ssrn.3353876 fatcat:5g4h3lei3bbufm6lb33igtrk5u