IDEAS home Printed from
   My bibliography  Save this paper

The Impact of the 1992 Cable Act on Consumer Demand and Welfare: A Discrete-Choice, Differentiated Products Approach


  • Crawford, Gregory S.


The regulations implemented in accord with the 1992 Cable Act legislated that the per-channel cable prices fall by 10-17% from their September, 1992 levels. Upon implementation, however, while cable prices did show moderate declines, cable expenditures did not - in 1/3 of cable markets, the average consumer's cable bill actually increased. In addition, the services provided by some systems and the programming provided on those services also changed. This paper measures the benefit to consumers of the Cable Act in light of these changes in services, programming, and prices by cable systems. A Discrete-Choice Differentiated Product model of demand for cable television service forms the basis of the analysis. The individual utility model underlying this framework can accommodate the arbitrary bundling of program networks into services for sale to consumers by cable systems. It therefore provides a natural framework for measuring the impact of the Cable Act: whereas changes in the set of services offered by systems changes the set of choices facing consumers in those markets, changes in the programming across services changes the utility to each of those choices. Explicit aggregation over both individuals and choices permits estimation using available observations on a cross-section of cable markets from before and after the Cable Act. The results indicate that while households in the median market could have expected to receive welfare gains of $0.91 per month, they instead received welfare losses of $0.33 per month, equivalent to a 4.3% increase in the price of Basic Service. Given these results, the flexibility of the modeling framework is exploited to simulate the effects of an alternative regulatory mechanism, that of untying of Basic Service from all other cable services. In the median market, households would be indifferent between such a policy and maintaining the tie but reducing the price of Basic Service by 18.7%. This is coincidentally just slightly higher than the final price reductions mandated by the Act.

Suggested Citation

  • Crawford, Gregory S., 1997. "The Impact of the 1992 Cable Act on Consumer Demand and Welfare: A Discrete-Choice, Differentiated Products Approach," Working Papers 97-32, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:97-32

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    JEL classification:

    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:duk:dukeec:97-32. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Economics Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.