Abstract: Economists and antitrust practitioners have long raised regulatory concerns regarding
abuses of market power through the bundling of products in the telecommunications and
broadcasting industry. Anticompetitive issues may further arise if market-dominant operators
frame bundle discounts as the “free” offer of a product (i.e., zero-price marketing)—a topic
that remains relatively underexplored in the literature. Given the consumer behavior
literature regarding free offers in the bundle context, however, it still remains unclear whether
market-dominant operators’ zero pricing can reinforce or weaken the anticompetitive effect.
Hence, we built a theoretical model of product bundling with different levels of market
competition and empirically test whether consumers prefer zero-priced bundles over similarly
priced groupings of products with a conjoint experiment. Consistent with strategic
foreclosure theory, we found that a market-dominant mobile network operator can
significantly raise its share in the pay-TV market by exploiting zero-price marketing. More
importantly, consumers who are economically at risk appear to be vulnerable to such zero-
price marketing. On top of anticompetitive effects, bundles often have hidden costs incurred
by multiyear contractual arrangements and thereby also have potential lock-in effects.
Therefore, consumers’ vulnerability to such free offers may call attention to regulatory
measures against zero-pricing marketing for bundles.

Bio: Professor Minki Kim is an Associate Professor of Marketing at KAIST College of Business. He holds a