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Demand, Pricing, and Regulation: Evidence from the Cable TV Industry

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Author Info
John W. Mayo
Yasuji Otsuka

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Abstract

Subsequent to the nationwide deregulation of the cable TV industry, a number of questions have been raised concerning the conduct of cable firms. Answers to these questions turn upon a fundamental set of issues regarding the economic relationships of demand, pricing, and regulation. In this article, we empirically examine these relationships for the period prior to deregulation. A number of basic findings emerge. Among these, we find that the demand for basic cable service ranges from being generally inelastic in rural areas to elastic in large urban markets. The elasticity of demand for pay cable services is typically well in excess of unity. Also, while regulation did not lead to economically efficient (marginal cost) prices for basic cable service, it did act to keep prices below monopoly levels. Moreover, our examination reveals some significant differences in the effectiveness of the various types of regulation practiced in the pre-deregulation period.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 22 (1991)
Issue (Month): 3 (Autumn)
Pages: 396-410
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Handle: RePEc:rje:randje:v:22:y:1991:i:autumn:p:396-410

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  1. Francis Su, . "Rental Harmony: Sperner's Lemma in Fair Division," Claremont Colleges Working Papers 1999-10, Claremont Colleges. [Downloadable!]
  2. Robert Seamans, 2008. "Pricing and Multi-Market Contact in the Cable TV Industry," Working Papers 08-13, NET Institute, revised Oct 2008. [Downloadable!]
  3. John S. Ying & Mary T. Kelly, 2007. "Testing the Effectiveness of Regulation and Competition on Cable Television Rates," Working Papers 07-07, University of Delaware, Department of Economics. [Downloadable!]
    Other versions:
  4. João Leitão, 2004. "Demand Pull And Supply Push In Portuguese Cable Television," Econometrics 0409011, EconWPA. [Downloadable!]
    Other versions:
  5. Tomaso Duso & Astrid Jung, 2007. "Market Conduct and Endogenous Lobbying: Evidence from the U.S. Mobile Telecommunications Industry," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 9-29, March. [Downloadable!] (restricted)
    Other versions:
  6. Alejandro Diaz-Bautista, 2005. "Regional Cluster Analysis in the Mexican Telecommunications Sector. Impact of Economies of Agglomeration, Clusters and networking in medium-sized Mexican Telecommunication firms," Urban/Regional 0511013, EconWPA. [Downloadable!]
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