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Optimal Divisionalization for Selling Networks of Cable Television Services

  • Joao Carlos Correia Leitao

    (University of Beira Interior)

In this article, a condition for the optimal division’s number is calculated, for a market with two cable operators who offer a network service. The rationale for justifying the partial covering of the national market from the cable operators is presented. Furthermore, a problem of moral hazard is revealed, which is able to appear through the implementation of franchising schemes with independent divisions. This is particularly interesting because it can be applied to several industries such as Cable Television and Entertainment, and other activities including Internet and Computer Games Centres, which offer Internet broadband access and network games.

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File URL: http://128.118.178.162/eps/io/papers/0403/0403004.pdf
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Paper provided by EconWPA in its series Industrial Organization with number 0403004.

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Length: 17 pages
Date of creation: 09 Mar 2004
Date of revision:
Handle: RePEc:wpa:wuwpio:0403004
Note: Type of Document - pdf; pages: 17
Contact details of provider: Web page: http://128.118.178.162

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  1. Stephen Polasky, 1993. "Divide And Conquer: On The Profitability Of Forming Independent Rival Divisions," Boston College Working Papers in Economics 210, Boston College Department of Economics.
  2. Veendorp, E C H, 1991. "Entry Deterrence, Divisionalization, and Investment Decisions," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 297-307, February.
  3. Brickley, James A. & Dark, Frederick H., 1987. "The choice of organizational form The case of franchising," Journal of Financial Economics, Elsevier, vol. 18(2), pages 401-420, June.
  4. Luis Corchón, 1991. "Oligopolistic Competition Among Groups," Working Papers. Serie AD 1991-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Dana, James D, Jr & Spier, Kathryn E, 2001. "Revenue Sharing and Vertical Control in the Video Rental Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 223-45, September.
  6. James A. Brickley & Frederick H. Dark & Michael S. Weisbach, 1991. "An Agency Perspective on Franchising," Financial Management, Financial Management Association, vol. 20(1), Spring.
  7. Bru, Lluís & de Haro, José-Manuel Ordóñez & Faulí-Oller, Ramon, 2001. "Divisionalization in Vertical Structures," CEPR Discussion Papers 3011, C.E.P.R. Discussion Papers.
  8. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  9. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
  10. Joseph Farrell & Michael Katz, 2002. "Competition or Predation? Schumpeterian Rivalry in Network Markets," Industrial Organization 0201003, EconWPA.
  11. Warren-Boulton, Frederick R, 1974. "Vertical Control with Variable Proportions," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 783-802, July/Aug..
  12. Baye, Michael R & Crocker, Keith J & Ju, Jiandong, 1996. "Divisionalization, Franchising, and Divestiture Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 86(1), pages 223-36, March.
  13. Norton, Seth W, 1988. "An Empirical Look at Franchising as an Organizational Form," The Journal of Business, University of Chicago Press, vol. 61(2), pages 197-218, April.
  14. Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 299-308, Autumn.
  15. Klein, Benjamin, 1995. "The economics of franchise contracts," Journal of Corporate Finance, Elsevier, vol. 2(1-2), pages 9-37, October.
  16. Huck, Steffen & Konrad, Kai A. & Müller, Wieland, 2000. "Divisionalization in contests," SFB 373 Discussion Papers 2000,9, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  17. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
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