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The Welfare Effects of Bundling in Multichannel Television Markets

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  • Crawford, Gregory S
  • Yurukoglu, Ali

Abstract

We measure how the bundling of television channels affects 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 à 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 à 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.

Suggested Citation

  • Crawford, Gregory S & Yurukoglu, Ali, 2011. "The Welfare Effects of Bundling in Multichannel Television Markets," CEPR Discussion Papers 8370, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8370
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    More about this item

    Keywords

    a la carte; bargaining; bundling; cable; counterfactual; econometrics; multichannel; nash product; pay; policy; price discrimination; regulation; satellite; structural estimation; television;
    All these keywords.

    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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