IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/8317.html
   My bibliography  Save this paper

The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television

Author

Listed:
  • Austan Goolsbee
  • Amil Petrin

Abstract

This paper examines the introduction of Direct Broadcast Satellites as an alternative to cable television and the welfare gains such satellites generated for consumers. The extent to which satellites compete with cable has become an important issue in the debate over re-regulation of cable prices. We estimate a consumer level demand system for satellite, basic cable, premium cable and local antenna using extensive micro data on the television choices of more than 15,000 people as well as price and characteristics data on cable companies throughout the nation. The results indicate that, after properly controlling for unobservable product attributes and the endogeneity of prices, the direct welfare gain to satellite buyers averages about $50 dollars per year or approximately $450 million annually in the aggregate. Estimates that do not control for unobserved attributes and endogenous prices overstate the welfare gains by almost a factor of fifteen. The price sensitivity of satellite to both its own price and the price of cable is extremely high. The price sensitivity of cable, however, is low, likely indicating that satellite is not a close substitute at the time of our sample.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:8317
    Note: IO PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w8317.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Robin A. Prager, 1990. "Firm Behavior in Franchise Monopoly Markets," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 211-225, Summer.
    2. Crawford, Gregory S., 1997. "New Products, New Programs, and Prices: Measuring ConsumerBenefits to Changes in Cable Television Choices, 1989-1995," Working Papers 97-28, Duke University, Department of Economics.
    3. Adam B. Jaffe & David M. Kanter, 1990. "Market Power of Local Cable Television Franchises: Evidence from the Effects of Deregulation," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 226-234, Summer.
    4. John W. Mayo & Yasuji Otsuka, 1991. "Demand, Pricing, and Regulation: Evidence from the Cable TV Industry," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 396-410, Autumn.
    5. Ellickson, Bryan, 1979. "Hedonic Theory and the Demand for Cable Television," American Economic Review, American Economic Association, vol. 69(1), pages 183-189, March.
    6. David M. Cutler & Edward L. Glaeser & Jacob L. Vigdor, 1999. "The Rise and Decline of the American Ghetto," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 455-506, June.
    7. Hause, John C, 1975. "The Theory of Welfare Cost Measurement," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1145-1182, December.
    8. Zupan, Mark A, 1989. "The Efficacy of Franchise Bidding Schemes in the Case of Cable Television: Some Systematic Evidence," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 401-456, October.
    9. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    10. Amil Petrin, 2001. "Quantifying the Benefits of New Products: The Case of the Minivan," NBER Working Papers 8227, National Bureau of Economic Research, Inc.
    11. Matthew D. Shapiro & David W. Wilcox, 1996. "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 93-154 National Bureau of Economic Research, Inc.
    12. Park, Rolla Edward, 1971. "The Growth of Cable TV and Its Probable Impact on Over-The-Air Broadcasting," American Economic Review, American Economic Association, vol. 61(2), pages 69-73, May.
    13. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-479, April.
    14. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The welfare effect of Apple-Cinnamon Cheerios
      by datacharmer in bluematter on 2007-09-25 05:05:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erik Brynjolfsson & Yu (Jeffrey) Hu & Michael D. Smith, 2003. "Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers," Management Science, INFORMS, vol. 49(11), pages 1580-1596, November.
    2. Elizabeth C. Klee, 2006. "Paper or plastic? the effect of time on the use of check and debit cards at grocery stores," Finance and Economics Discussion Series 2006-02, Board of Governors of the Federal Reserve System (U.S.).
    3. Khan, Beethika S., 2004. "Consumer Adoption of Online Banking: Does Distance Matter?," Department of Economics, Working Paper Series qt2bt1d76s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Gilbert, Richard & Ratliff, James, 2007. "Sky Wars: The Attempted Merger of EchoStar and DirecTV (2000)," Competition Policy Center, Working Paper Series qt38p01826, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    5. Gao, Maija & Hyytinen, Ari & Toivanen, Otto, 2005. "Demand for Mobile Internet: Evidence from a Real-World Pricing Experiment," Discussion Papers 964, The Research Institute of the Finnish Economy.
    6. Town, Robert & Liu, Su, 2003. " The Welfare Impact of Medicare HMOs," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 719-736, Winter.
    7. Judith Chevalier & Austan Goolsbee, 2005. "Are Durable Goods Consumers Forward Looking? Evidence from College Textbooks," NBER Working Papers 11421, National Bureau of Economic Research, Inc.
    8. Beethika Khan, 2004. "Consumer Adoption of Online Banking: Does Distance Matter?," Development and Comp Systems 0407002, EconWPA.
    9. Pinar Karaca-Mandic, 2011. "Role of complementarities in technology adoption: The case of DVD players," Quantitative Marketing and Economics (QME), Springer, vol. 9(2), pages 179-210, June.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L8 - Industrial Organization - - Industry Studies: Services

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:nbr:nberwo:8317. 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: () or (Joanne Lustig). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.