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The effect of satellite entry on cable television prices and product quality

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  • Chenghuan Sean Chu

Abstract

How has the entry of satellite television affected the pricing and product quality of incumbent cable firms' programming packages? I estimate a model in which firms compete over both price and product quality (as determined by what channels are offered). Satellite entry typically causes cable firms to raise quality and lower price. However, in some markets, cable optimally responds by raising both price and quality or by lowering both price and quality. A counterfactual scenario that eliminates quality competition results in, on average, softer price competition and lower aggregate consumer surplus, but greater surplus for consumers with weaker preferences for quality.

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  • Chenghuan Sean Chu, 2010. "The effect of satellite entry on cable television prices and product quality," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 730-764, December.
  • Handle: RePEc:bla:randje:v:41:y:2010:i:4:p:730-764
    DOI: 10.1111/j.1756-2171.2010.00119.x
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    3. David P. Byrne & Susumu Imai & Vasilis Sarafidis & Masayuki Hirukawa, 2015. "Instrument-free Identification and Estimation of Differentiated Products Models," Working Paper Series 26, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    4. David P. Byrne, 2015. "Testing Models Of Differentiated Products Markets: Consolidation In The Cable Tv Industry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(3), pages 805-850, August.
    5. Gregory S. Crawford & Oleksandr Shcherbakov & Matthew Shum, 2015. "The welfare effects of endogenous quality choice in cable television markets," ECON - Working Papers 202, Department of Economics - University of Zurich.
    6. Andrew Sfekas, 2019. "Quality Competition and Intra-System Substitution in the Hospital Industry," American Journal of Health Economics, MIT Press, vol. 5(1), pages 65-96, Winter.
    7. Stefano CLÒ & Massimo FLORIO & Valentina MORRETTA & Davide VURCHIO, 2019. "Earth Observation in a Cost-Benefit Analysis Perspective: Cosmo SkyMed Satellites of the Italian Space Agency," Departmental Working Papers 2019-06, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    8. Ying Fan, 2013. "Ownership Consolidation and Product Characteristics: A Study of the US Daily Newspaper Market," American Economic Review, American Economic Association, vol. 103(5), pages 1598-1628, August.
    9. T. Randolph Beard & Jeffrey T. Macher & John W. Mayo, . "'Can you Hear Me Now?' Exit, Voice and Loyalty Under Increasing Competition," Journal of Law and Economics, University of Chicago Press, vol. 58(3).
    10. Marco A. Marini, 2018. "Collusive agreements in vertically differentiated markets," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 3, pages 34-56, Edward Elgar Publishing.
    11. Elena Argentesi & Paolo Buccirossi & Roberto Cervone & Tomaso Duso & Alessia Marrazzo, 2021. "The Effect of Mergers on Variety in Grocery Retailing," CESifo Working Paper Series 9137, CESifo.
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