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Market Power and Price Increases for Basic Cable Service Since Deregulation

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  • Robert N. Rubinovitz

Abstract

Since the deregulation of rates for basic cable television service, increases in price have outpaced the rate of inflation. This article examines whether or not cable systems' increased market power, or their increased exercise of market power, explains these price increases. An estimated "quasi-supply" function for cable systems before and after deregulation implies that real basic cable prices increased 18% since deregulation, holding quality and other costs constant, accounting for 43% of the total real price increase. A demand equation is also estimated, and the estimated demand elasticity of basic cable does not change after deregulation, implying that this 18% real price increase is due to greater exercise of existing market power, made possible by the elimination of price regulation, rather to an increase in market power caused by a change in the demand elasticity for cable.

Suggested Citation

  • Robert N. Rubinovitz, 1993. "Market Power and Price Increases for Basic Cable Service Since Deregulation," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 1-18, Spring.
  • Handle: RePEc:rje:randje:v:24:y:1993:i:spring:p:1-18
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    Cited by:

    1. Lam, Pun-Lee, 1999. "Regulatory effects on electricity prices in Hong Kong," Energy Economics, Elsevier, vol. 21(6), pages 528-544, December.
    2. Mary T Kelly & John S Ying, 2014. "Testing the Effectiveness of Regulation and Competition on Cable Television Rates," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 40(3), pages 387-404, June.
    3. Tasneem Chipty, 2001. "Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry," American Economic Review, American Economic Association, vol. 91(3), pages 428-453, June.
    4. Robert C. Seamans, 2012. "Fighting City Hall: Entry Deterrence and Technology Upgrades in Cable TV Markets," Management Science, INFORMS, vol. 58(3), pages 461-475, March.
    5. Patrick Warren & Tom Wilkening, 2010. "Regulatory Fog: The Informational Origins of Regulatory Persistence," Department of Economics - Working Papers Series 1113, The University of Melbourne.
    6. Austan Goolsbee & Amil Petrin, 2001. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television," NBER Working Papers 8317, National Bureau of Economic Research, Inc.
    7. Diane Bruce Anstine, 2001. "How Much Will Consumers Pay? A Hedonic Analysis of the Cable Television Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(2), pages 129-147, September.
    8. David Genesove & Wallace P. Mullin, 1995. "Validating the Conjectural Variation Method: The Sugar Industry, 1890-1914," Working papers 95-20, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. Cincera, Michele & Noury, Abdul, 2004. "Monopoly Practises and Competitive Behaviour in the French Satellite Pay-TV Market," CEPR Discussion Papers 4174, C.E.P.R. Discussion Papers.
    10. repec:bla:jindec:v:65:y:2017:i:3:p:510-558 is not listed on IDEAS
    11. Agyei Karikari, John & Brown, Stephen M. & Abramowitz, Amy D., 2003. "Subscriptions for direct broadcast satellite and cable television in the US: an empirical analysis," Information Economics and Policy, Elsevier, vol. 15(1), pages 1-15, March.
    12. Aidan R. VINING & Anthony E. BOARDMAN & Mark A. MOORE, 2014. "The Theory And Evidence Pertaining To Local Government Mixed Enterprises," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(1), pages 53-86, March.
    13. Crawford, Gregory S & Shum, Matthew, 2007. "Monopoly Quality Degradation and Regulation in Cable Television," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 181-219, February.
    14. Corts, Kenneth S., 1998. "Conduct parameters and the measurement of market power," Journal of Econometrics, Elsevier, vol. 88(2), pages 227-250, November.
    15. Robert B. Ekelund Jr & Edward O. Price III, 2012. "The Economics of Edwin Chadwick," Books, Edward Elgar Publishing, number 14915, April.
    16. Burnstein, David E, 2005. "An Examination of Market Power in the Intrastate Long-Distance Telephone Service Markets: Evidence from a Natural Experiment," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 149-171, April.
    17. João Leitão, 2004. "Demand Pull and Supply Push in Portuguese Cable Television," Econometrics 0411009, EconWPA.
    18. Gregory S. Crawford, 2015. "The economics of television and online video markets," ECON - Working Papers 197, Department of Economics - University of Zurich.
    19. Ovtchinnikov, Alexei V., 2010. "Capital structure decisions: Evidence from deregulated industries," Journal of Financial Economics, Elsevier, vol. 95(2), pages 249-274, February.
    20. Crawford, Gregory S., 2015. "The Economics of Television and Online Video Markets," CEPR Discussion Papers 10676, C.E.P.R. Discussion Papers.
    21. Waterman, David & Weiss, Andrew A., 1996. "The effects of vertical integration between cable television systems and pay cable networks," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 357-395.
    22. Ekelund, Robert B, Jr & Ford, George S & Koutsky, Thomas, 2000. "Market Power in Radio Markets: An Empirical Analysis of Local and National Concentration," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 157-184, April.

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