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Authors: Sabrina Du, Saint Norbert College; Cameron Ellis, Temple University
Product bundling is a popular way for companies to retain their customers and keep up with fast-changing market demand. We examine how product bundling impacts the price elasticity for insurance products. We estimate a model of consumer demand for auto and homeowners' insurance using a random coefficients logit model. Our model incorporates flexible consumer preferences over companies' characteristics and ability to bundle their products. We exploit asymmetry in the impact of state insurance tax laws for identification.
