Portal de Periódicos da CAPES

The effect of satellite entry on cable television prices and product quality

2010; Wiley; Volume: 41; Issue: 4 Linguagem: Inglês

10.1111/j.1756-2171.2010.00119.x

1756-2171

Chenghuan Sean Chu,

Merger and Competition Analysis

The RAND Journal of EconomicsVolume 41, Issue 4 p. 730-764 The effect of satellite entry on cable television prices and product quality Chenghuan Sean Chu, Chenghuan Sean Chu Federal Reserve Board of Governors; [email protected].Search for more papers by this author Chenghuan Sean Chu, Chenghuan Sean Chu Federal Reserve Board of Governors; [email protected].Search for more papers by this author First published: 08 November 2010 https://doi.org/10.1111/j.1756-2171.2010.00119.xCitations: 38 This article is based on a chapter from Chu's 2007 dissertation. The views expressed are his own and do not necessarily reflect the opinions of the Board of Governors or the staff of the Federal Reserve System. He would like to thank DirecTV, Echostar, Warren Publishing, and Media Business Corporation for providing the data used in this study. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat Abstract How has the entry of satellite television affected the pricing and product quality of incumbent cable firms' programming packages? I estimate a model in which firms compete over both price and product quality (as determined by what channels are offered). Satellite entry typically causes cable firms to raise quality and lower price. However, in some markets, cable optimally responds by raising both price and quality or by lowering both price and quality. A counterfactual scenario that eliminates quality competition results in, on average, softer price competition and lower aggregate consumer surplus, but greater surplus for consumers with weaker preferences for quality. References Berry, S., Levinsohn, J., and Pakes, A. Automobile Prices in Market Equilibrium. Econometrica, Vol. 63 (1995), pp. 841–890. Besanko, D., Donnenfeld, S., and White, L. The Multi-Product Firm, Quality Choice and Regulation. Journal of Industrial Economics, Vol. 36 (1988), pp. 411–429. Bresnahan, T. Departures from Marginal-Cost Pricing in the American Automobile Industry. Journal of Econometrics, Vol. 17 (1981), pp. 201–227. Chipty T. Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry. American Economic Review, Vol. 91 (2001), pp. 428–453. Chu, C.S., Leslie, P., and Sorensen, A. Nearly Optimal Pricing for Multiproduct Firms. American Economic Review, (2009). Corts, K. Regulation of a Multi-Product Monopolist: Effects on Pricing and Bundling. Journal of Industrial Economics, Vol. 43 (1995), pp. 377–397. Crawford, G. and Shum, M. The Welfare Effects of Endogenous Quality Choice: The Case of Cable Television." Mimeo, Department of Economics, University of Arizona , 2006. Crawford, G. and Shum, M.. Monopoly Quality Degradation and Regulation in Cable Television. Journal of Law and Economics, Vol. 50 (2007), pp. 181–209. Draganska, M., Mazzeo, M., and Seim, K. Beyond Plain Vanilla: Modeling Joint Product Assortment and Pricing Decisions. Quantitative Marketing and Economics, Vol. 7 (2009), pp. 105–146. Federal Communications Commission. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Twelfth Annual Report to Congress, MB Docket no. 05-255. Washington , DC : Government Printing Office, 2006a. Federal Communications Commission. Report on Cable Industry Prices, FCC 06-179, MM Docket no. 92-266. Washington , DC : Government Printing Office, 2006b. Goolsbee, A. and Petrin, A. The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV. Econometrica, Vol. 72 (2004), pp. 351–381. Hazlett, T. and Spitzer, M. Public Policy towards Cable Television: The Economics of Rate Controls. Cambridge , Mass. : MIT Press, 1997. Lustig, J. Measuring Welfare Losses from Adverse Selection and Imperfect Competition in Privatized Medicare." Mimeo, Department of Economics, Boston University , 2009. Mortimer, J. Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs. Quarterly Journal of Economics, Vol. 122 (2007), pp. 1307–1350. Miravete, E. The Welfare Performance of Sequential Pricing Mechanisms. International Economic Review, Vol. 46 (2005), pp. 1321–1360. Shcherbakov, O. Measuring Consumer Switching Costs in the Television Industry." Mimeo, Department of Economics, University of Arizona , 2008. Shcherbakov, O.. Effect of Consumer Switching Costs on Market Power of Cable Television Product Providers." Mimeo, Department of Economics, University of Arizona , 2009. U.S. General Accounting Office. The Effect of Competition from Satellite Providers on Cable Rates, Report to Congressional Requesters, GAO/RCED-00-164. Washington , DC : Government Printing Office, 2000. Wilson, R.B. Nonlinear Pricing. Oxford : Oxford University Press, 1993. Yurukoglu, A. The Welfare Effects of Bundling in Multi-Channel Television Markets." Mimeo, Department of Economics, Stern School of Business, New York University , 2009. Citing Literature Volume41, Issue4Winter 2010Pages 730-764 ReferencesRelatedInformation