Estimating Product Characteristics and Spatial Competition in the Network Television Industry
Assessing the demand for products with characteristics that are unobservable or difficult to measure is becoming increasingly important with the growing proliferation and value of such products. Analyzing industry performance and firm competition in these sectors is hindered by the failure of traditional empirical methods to estimate demand for the products of these sectors. This paper focuses on the network television industry to present: (a) an empirical analysis of spatial competition, and (b) a structural approach to estimating product characteristics and consumer preferences in such industries, and (c) optimal network programming and scheduling given the estimated demand system. We use maximum simulated likelihood to estimate a structural model of viewer choice, yielding estimates of the latent characteristics of each show, the distribution of consumers' preferences for these characteristics, and the state dependence of choices. Results indicate the attribute space spans four dimensions of horizontal differentiation and one vertically differentiated dimension. Interpretations of these dimensions reflect the traditional show labels. For example, one of the dimensions represents the degree of realism in a show. Furthermore, the clustering of shows based on the estimated characteristics corresponds to traditional show labels. We identify four clusters --- sitcoms for mature viewers, sitcoms for younger viewers, reality based dramas, and fictional dramas. Regarding strategic behavior, our model suggests the networks should use counter-programming (i.e., differentiated products) within each time slot and homogeneous programming through each night. The estimated show locations reveal an extensive use of these strategies, as well as a limited degree of branding. Nonetheless, by unilaterally changing their schedules to increase both counter-programming and homogeneity, ABC, CBS, and NBC are able to increase their weekly ratings by 16%, 12%, and 15%, respectively. In a Nash equilibrium of the static scheduling game, these gains are reduced to 15%, 6%, and 12% increases.
|Date of creation:||01 Aug 2000|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- V A Hajivassiliou, 1997. "Some Practical Issues in Maximum Simulated Likelihood," STICERD - Econometrics Paper Series 340, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Vassilis A. Hajivassiliou & Paul A. Ruud, 1993.
"Classical Estimation Methods for LDV Models Using Simulation,"
Cowles Foundation Discussion Papers
1051, Cowles Foundation for Research in Economics, Yale University.
- Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier.
- V.A. Hajivassiliou & P. A. Ruud, 1993. "Classical Estimation Methods for LDV Models Using Simulation," Econometrics 9311002, EconWPA.
- Hajivassiliou, Vassilis A & Ruud, Paul A., 1993. "Classical Estimation Methods for LDV Models Using Simulation," Department of Economics, Working Paper Series qt3cg196fr, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Vassilis A. Hajivassiliou and Paul A. Ruud., 1993. "Classical Estimation Methods for LDV Models Using Simulation," Economics Working Papers 93-219, University of California at Berkeley.
- Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
- Roland T. Rust & Mark I. Alpert, 1984. "An Audience Flow Model of Television Viewing Choice," Marketing Science, INFORMS, vol. 3(2), pages 113-124.
- Wagner A. Kamakura & Rajendra K. Srivastava, 1986. "An Ideal-Point Probabilistic Choice Model for Heterogeneous Preferences," Marketing Science, INFORMS, vol. 5(3), pages 199-218.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- A. Papageorgiou & J. F. Traub, 1996. "New Results on Deterministic Pricing of Financial Derivatives," Working Papers 96-06-040, Santa Fe Institute.
- John Rust, 1997. "A Comparison of Policy Iteration Methods for Solving Continuous-State, Infinite-Horizon Markovian Decision Problems Using Random, Quasi-random, and Deterministic Discretizations," Computational Economics 9704001, EconWPA.
- Goettler, R., 1999. "Advertising Rates, Audience Composition, and Competition in the Network Television Industry," GSIA Working Papers 1999-28, Carnegie Mellon University, Tepper School of Business.
- James J. Heckman & James M. Snyder, Jr., 1996. "Linear Probability Models of the Demand for Attributes with an Empirical Application to Estimating the Preferences of Legislators," NBER Working Papers 5785, National Bureau of Economic Research, Inc.
- repec:cep:stiecm:/1997/340 is not listed on IDEAS
- Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
- Terry Elrod, 1988. "Choice Map: Inferring a Product-Market Map from Panel Data," Marketing Science, INFORMS, vol. 7(1), pages 21-40.
- Daniel McFadden, 1987.
"A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration,"
464, Massachusetts Institute of Technology (MIT), Department of Economics.
- McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:1691. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.