Economics of bundling (50 pts)
We are seeing a merging of media firms. For example, companies like Verizon now provide phone, cell, TV and internet. A common form of selling services involves putting them together in packages or “bundles” and offering them for a lower price than if the services were sold separately. For example, Verizon may offer a deal for phone, TV, and internet services. Also, firms bundle TV channels in different packages. All of these practices have become controversial. First, watch this brief video on the economics of bundling: https://www.youtube.com/watch?v=8mw5RLzWNnE (Links to an external site.)
Then read this analysis from the UCLA Law Review of the bundling controversies: http://www.uclalawreview.org/?p=5642 (Links to an external site.)
Many consumers are moving away from buying bundles by “cutting the cord” through a variety of techniques. Watch this Wall Street Journal video on ways to cut the cord: https://www.youtube.com/watch?v=d2YpIbQd0rM (Links to an external site.)
1a.Explain the economics of bundling, both from a consumer and producer prospective.
1b. Do you think that the government should limit the bundling of TV channels by cable companies?
1c. Is bundling a good idea for consumers? Explain your answer.
2 The economics of Uber
Uber is a ride-sharing business which is revolutionizing the taxi-market. First, make sure you understand how Uber works by going to their website (Uber.com) and their competitors (Lyft and Sidecar). Then answer the following questions:
2a. Explain the economics of the taxi medallion system. This is discussed in the text and in numerous places on the web. Why did cities start the medallion system? Do you think it is a good idea?
2b. Explain the economics of the ride-sharing firms such as Uber. There’s a lot of resources on the web, such as:
http://www.economist.com/news/finance-and-economics/21599766-microeconomics-ubers-attempt-revolutionise-taxi-markets-pricing-surge (Links to an external site.)
http://economicstudents.com/2014/08/the-economics-of-uber/ (Links to an external site.)
http://www.bruegel.org/nc/blog/detail/article/1445-the-economics-of-uber/ (Links to an external site.)
http://www.nytimes.com/2015/06/28/upshot/in-an-uber-world-fortune-favors-the-freelancer.html?_r=0 (Links to an external site.)
2c. Should government regulate Uber? Explain your answer
IMPORTANT: All answers must be written in your own words.
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