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The Welfare Effects of Bundling in Multichannel Television Markets

Author Info

  • Gregory S. Crawford
  • Ali Yurukoglu

Abstract

We measure how the bundling of television channels affects short-run welfare. We estimate an industry model of viewership, demand, pricing, bundling, and input-market bargaining using data on ratings, purchases, prices, bundles, and input costs. We conduct simulations of a la carte policies that require distributors to offer individual channels for sale to consumers. We estimate that negotiated input costs rise by 103.0 percent under a la carte. These higher input costs offset consumer benefits from purchasing individual channels. Mean consumer and total surplus change by an estimated -- 5.4 to 0.2 percent and -- 1.7 to 6.0 percent, respectively. (JEL D12, L11, L51, L82, M31)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.2.643
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 2 (April)
Pages: 643-85

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:2:p:643-85
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Find related papers by JEL classification:
  • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
  • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
  • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
  • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

References listed on IDEAS
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  1. Hanming Fang & Peter Norman, 2003. "To Bundle or Not to Bundle," Cowles Foundation Discussion Papers 1440, Cowles Foundation for Research in Economics, Yale University.
  2. Chenghuan Sean Chu & Phillip Leslie & Alan Sorensen, 2011. "Bundle-Size Pricing as an Approximation to Mixed Bundling," American Economic Review, American Economic Association, vol. 101(1), pages 263-303, February.
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  8. Gregory S. Crawford & Ali Yurukoglu, 2012. "The Welfare Effects of Bundling in Multichannel Television Markets," American Economic Review, American Economic Association, vol. 102(2), pages 643-85, April.
  9. Steven Berry & James Levinsohn & Ariel Pakes, 2001. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Cowles Foundation Discussion Papers 1337, Cowles Foundation for Research in Economics, Yale University.
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  12. Adam D. Rennhoff & Konstantinos Serfes, 2009. "The Role of Upstream-Downstream Competition on Bundling Decisions: Should Regulators Force Firms to Unbundle?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(2), pages 547-588, 06.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Does Cable TV Ripoff People Who Don’t Like Sports?
    by Alex Tabarrok in Marginal Revolution on 2013-01-18 12:12:02
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