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Consolidation and Price Discrimination in the Cable Television Industry

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  • David P.Byrne

Abstract

This paper measures the impact of consolidation on cable television prices, product quality,profits and consumer welfare. I estimate a multi-product monopoly model using panel data on cable menus and costs in Canada from 1990 to 1996. Using counterfactual simulations, I find mean consumer welfare rises with acquisitions, as does welfare inequality across consumers. Scale economies are the primary driver of consolidation effects quantitatively, with firm heterogeneity in demand and costs having a smaller impact. Regional consolidation yields non-negligible welfare gains, particularly in rural markets where potential cable quality improvements and cost reductions are the largest.

Suggested Citation

  • David P.Byrne, 2011. "Consolidation and Price Discrimination in the Cable Television Industry," Department of Economics - Working Papers Series 1118, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1118
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0003/784254/1118.pdf
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    References listed on IDEAS

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    1. 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.
    2. 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.
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    5. David Byrne, 2010. "Acquisitions As A Response To Deregulation: Evidence From The Cable Television Industry," Working Paper 1242, Economics Department, Queen's University.
    6. Tasneem Chipty & Christopher M. Snyder, 1999. "The Role Of Firm Size In Bilateral Bargaining: A Study Of The Cable Television Industry," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 326-340, May.
    7. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, September.
    8. Stephen M. Law, 1999. "Holding the line: The CRTC and the pricing of Canadian basic cable television services," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 630-653, May.
    9. Gregory S. Crawford, 2014. "Cable Regulation in the Internet Era," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 137-193, National Bureau of Economic Research, Inc.
    10. Steven T. Berry & Joel Waldfogel, 2001. "Do Mergers Increase Product Variety? Evidence from Radio Broadcasting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 1009-1025.
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    Cited by:

    1. Crawford, Gregory S., 2012. "Endogenous product choice: A progress report," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 315-320.
    2. Justin P. Johnson & Andrew Rhodes, 2021. "Multiproduct mergers and quality competition," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 633-661, September.
    3. Crawford, Gregory S., 2012. "Endogenous Product Choice: A Progress Report," Economic Research Papers 270745, University of Warwick - Department of Economics.
    4. 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.
    5. Crawford, Gregory & Shcherbakov, Oleksandr & Shum, Matthew, 2015. "The Welfare E ects of Endogenous Quality Choice in Cable Television Markets," CEPR Discussion Papers 10793, C.E.P.R. Discussion Papers.
    6. Nissan, Edward & Naghshpour, Shahdad, 2014. "Costs and Revenues of à la Carte (ALC) Versus Bundling in Television Markets," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 44(1).

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    More about this item

    Keywords

    Consolidation; Price Discrimination; Economies of Scale; Firm Heterogeneity;
    All these keywords.

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