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The Welfare Effects of Vertical Integration in Multichannel Television Markets

Author

Listed:
  • Robin Lee

    (Stern School of Business, New York Unive)

  • Michael Whinston
  • Ali Yurukoglu

    (Stanford University)

  • Gregory Crawford

    (University of Warwick)

Abstract

We investigate the welfare effects of vertical integration in U.S. multichannel television markets. Vertical integration in this market can enhance efficiency by aligning investment incentives and/or reducing double marginalization, but can also increase market power by encouraging raising rivals costs. We measure these competing effects in the carriage, channel placement, and pricing decisions of regional sports networks (RSN's) by affiliated and unaffiliated cable and satellite television distributors. We carry out descriptive analyses that compare integrated and non-integrated RSN's and distributors' prices and carriage, investment levels, and viewership ratings. We then estimate a model of viewership, subscription, distributor pricing, bargaining, and investment in RSN quality. We use the estimated model to analyze the welfare effects of simulated vertical mergers and de-mergers and the closing of the so-called "terrestrial loophole" by the U.S. Federal Communications Commission

Suggested Citation

  • Robin Lee & Michael Whinston & Ali Yurukoglu & Gregory Crawford, 2013. "The Welfare Effects of Vertical Integration in Multichannel Television Markets," 2013 Meeting Papers 81, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:81
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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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