Bundling in telecommunications retail markets is growing, with nearly two thirds of households now purchasing a form of bundle in the UK.
Consumer demand is driven by rational and consistent maximisation of personal benefit, and the idiosyncratic psychological ways people actually make decisions.
Behavioural economics is the study of economic decision making in the light of advances in psychology, however, little is known about the behavioural underpinnings of bundling.
This paper explores bundling through the following questions:
- What is the decision-making process?
- Who is more likely to bundle?
- How does bundling affect consumption?
- How might firms encourage bundling?
- How might behavioural economics inform regulation of bundles?
Telecommunications consumers are typically conscious of price, quality and their consumption habits – they are ideal subjects for behavioural economic analysis.
The results have implications for operators and regulators alike.