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Digital Convergence, Pricing Strategies and Firms' Profits in the Telecommunication and Entertainment Media Industry | IEEE Conference Publication | IEEE Xplore

Digital Convergence, Pricing Strategies and Firms' Profits in the Telecommunication and Entertainment Media Industry


Abstract:

Digital convergence of telecommunication and entertainment media services drove former network monopolists into a prisoner's dilemma forcing them to enter each others mar...Show More

Abstract:

Digital convergence of telecommunication and entertainment media services drove former network monopolists into a prisoner's dilemma forcing them to enter each others markets. In this reciprocal duopoly firms now offer their services in a bundle, commonly known as triple play. I investigate whether bundling is indeed a profitable pricing strategy for these services and if it can facilitate market power leverage. I will show that bundle pricing serves as a powerful leverage device for one firm in this industry. This is achieved through a quality sorting effect accruing as the firms wish to shield themselves from increased price competition in the market for bundles. Thereby, one firm emerges as the high-quality, high-profit provider in both markets, whereas the competing firm has to settle for low qualities and profits.
Date of Conference: 14-15 June 2007
Date Added to IEEE Xplore: 27 November 2007
ISBN Information:
Conference Location: Helsinki, Finland

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