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A Study on the Effects of Handset Bundling on Competition and Consumer Welfare

단말기 번들링이 경쟁과 소비자후생에 미치는 효과 연구

  • Chung, Sukkyun (Dept. of Policy, College of Policy Science, Hanyang University)
  • 정석균 (한양대학교 정책과학대학 정책학과)
  • Received : 2014.04.14
  • Accepted : 2014.07.20
  • Published : 2014.07.28

Abstract

This paper finds that the ultimate source of problems facing Korean mobile telecommunications such as excessive subsidies of handsets, waste of resources, and a vicious circle of expensive handsets and high prices for services, is bundling of handset and subscription. The analysis suggests that bundling causes consumers to confuse about prices of handsets and services, and firms focus on handset subsidy competition rather than on upgrading service qualities and lowering prices due to anti-competitive effects of bundling. Because most of the cost of bundling is passed on to consumers, the welfare of consumers decline. In particular, equality among consumers worsens due to price discriminations. To resolve these problems, unbundling of handset and subscription is a necessity. Mixed bundling allowing separate selling of handsets under bundling does not seem to work as a cure because bundling tends to be a dominant strategy. The best regulatory policy is a complete separation of handset and subscription.

Keywords

Bundling;handset;mobile telecommunications services;handset subsidy;telecommunications services fee

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