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The Deterrent Effect of Cable System Clustering on Overbuilders: An Economic Analysis of Behrend v. Comcast

Author

Listed:
  • Philip J. Reny

    (University of Chicago)

  • Michael A. Williams

    (Competition Economics LLC)

Abstract

Empirical research on cable industry prices demonstrates that, all else equal, cable operators with highly clustered systems generally charge higher prices than unclustered cable companies. One factor that explains this outcome is the deterrent effect that clustering has on overbuilders. All else equal, the presence of overbuilders leads incumbent cable operators to lower their cable prices. We present a model of overbuilding that provides a theoretical basis for the empirical finding that clustered cable companies charge higher prices than unclustered cable companies. The model played an important role in the prominent antitrust case Behrend v. Comcast.

Suggested Citation

  • Philip J. Reny & Michael A. Williams, 2015. "The Deterrent Effect of Cable System Clustering on Overbuilders: An Economic Analysis of Behrend v. Comcast," Economics Bulletin, AccessEcon, vol. 35(1), pages 519-527.
    • Handle: RePEc:ebl:ecbull:eb-14-00987
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    cable industry; market power; strategic entry deterrence; overbuilders;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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