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The Welfare Effects of Bundling in Multichannel Television Markets

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  • 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)

Suggested Citation

  • 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 643-685, April.
    • Handle: RePEc:aea:aecrev:v:102:y:2012:i:2:p:643-85
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    More about this item

    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

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