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The Welfare Effects of Bundling in Multichannel Television Markets

  • Gregory S. Crawford
  • Ali Yurukoglu

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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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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  1. Jacques Cremer & Michael H. Riordan, 1987. "On Governing Multilateral Transactions with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 436-451, Autumn.
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  7. Donald W.K. Andrews & Gustavo Soares, 2007. "Inference for Parameters Defined by Moment Inequalities Using Generalized Moment Selection," Cowles Foundation Discussion Papers 1631, Cowles Foundation for Research in Economics, Yale University.
  8. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, 05.
  9. Katherine Ho, 2005. "Insurer-Provider Networks in the Medical Care Market," NBER Working Papers 11822, National Bureau of Economic Research, Inc.
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