The Benefits from Bundling Demand in K-12 Broadband Procurement

Gaurab Aryal (), Charles Murry, Pallavi Pal and Arnab Palit

Papers from arXiv.org

Abstract: We study a new market design for K-12 schools' internet procurement. In 2014, New Jersey switched from school-specific decentralized procurement to a new system that bundled participating schools into four regional groups. Using an event study approach, we estimate that participation in this new procurement system reduced K-12 schools' internet prices by approximately $10 per megabit per second per month (Mbps) 37% relative to baseline levels, while increasing bandwidth by 500% Mbps. Relying on a feature of the procurement design, we present evidence that prices fell because bundling mitigated the exposure problem in internet procurement -- the risk that suppliers win contracts insufficient to cover their fixed infrastructure costs. Our findings are robust to deviations from the parallel trend assumption that may arise in our setting because of voluntary participation. Bounding the change in school expenditures due to the program, we find that participants saved at least as much as their federal E-rate subsidy. Using the estimated price reduction and bandwidth expansion, we calculate substantial welfare gains under minimal assumptions on schools' demand for broadband.

Date: 2024-02, Revised 2025-02
New Economics Papers: this item is included in nep-ict and nep-ure
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Working Paper: The Benefits from Bundling Demand in K-12 Broadband Procurement (2025)
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