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Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry

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Author Info
Tasneem Chipty
Abstract

I examine the effects of vertical integration between programming and distribution in the cable television industry. I assess the effects of ownership structure on program offerings, prices, and subscriptions, and I compare consumer welfare across integrated and unintegrated markets. The results of this analysis suggest two general conclusions. First, integrated operators tend to exclude rival program services, suggesting that certain program services cannot gain access to the distribution networks of vertically integrated cable system operators. Second, vertical integration does not harm, and may actually benefit, consumers because of the associated efficiency gains.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 3 (June)
Pages: 428-453
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Handle: RePEc:aea:aecrev:v:91:y:2001:i:3:p:428-453

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mullin, Joseph C & Mullin, Wallace P, 1997. "United States Steel's Acquisition of the Great Northern Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 74-100, April.
  2. Waterman, David & Weiss, Andrew A., 1996. "The effects of vertical integration between cable television systems and pay cable networks," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 357-395. [Downloadable!] (restricted)
  3. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March. [Downloadable!] (restricted)
  4. Grimm, Curtis M & Winston, Clifford & Evans, Carol A, 1992. "Foreclosure of Railroad Markets: A Test of Chicago Leverage Theory," Journal of Law & Economics, University of Chicago Press, vol. 35(2), pages 295-310, October.
  5. Quirmbach, Herman C, 1986. "Vertical Integration: Scale Distortions, Partial Integration, and the Direction of Price Change," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 131-47, February. [Downloadable!] (restricted)
  6. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September. [Downloadable!] (restricted)
  7. Robert N. Rubinovitz, 1993. "Market Power and Price Increases for Basic Cable Service Since Deregulation," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 1-18, Spring. [Downloadable!] (restricted)
  8. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May. [Downloadable!] (restricted)
  9. Westfield, Fred M, 1981. "Vertical Integration: Does Product Price Rise or Fall?," American Economic Review, American Economic Association, vol. 71(3), pages 334-46, June. [Downloadable!] (restricted)
  10. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Cincera, Michele & Noury, Abdul, 2004. "Monopoly Practises and Competitive Behaviour in the French Satellite Pay-TV Market," CEPR Discussion Papers 4174, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Ali Hortacsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," NBER Working Papers 12894, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. João Leitão, 2004. "Demand Pull And Supply Push In Portuguese Cable Television," Econometrics 0409011, EconWPA. [Downloadable!]
    Other versions:
  4. Acemoglu, Daron & Aghion, Philippe & Griffith, Rachel & Zilibotti, Fabrizio, 2005. "Vertical Integration and Technology: Theory and Evidence," CEPR Discussion Papers 5258, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Zava Aydemir & Stefan Buehler, 2002. "Estimating Vertical Foreclosure in U.S. Gasoline Supply," Working Papers 0212, University of Zurich, Socioeconomic Institute. [Downloadable!]
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  6. Michael H. Riordan, 2005. "Competitive effects of vertical integration," Discussion Papers 0506-11, Columbia University, Department of Economics. [Downloadable!]
  7. Stefan Buehler & Armin Schmutzler, 2005. "Asymmetric Vertical Integration," Advances in Theoretical Economics, Berkeley Electronic Press, vol. 5(1), pages 1164-1164. [Downloadable!] (restricted)
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  8. Stennek, Johan, 2007. "Exclusive Quality - Why Exclusive Distribution May Benefit the TV Viewers," CEPR Discussion Papers 6072, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Volker Nocke & Lucy White, 2003. "Do Vertical Mergers Facilitate Upstream Collusion? Second Version," PIER Working Paper Archive 05-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 08 Mar 2005. [Downloadable!]
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