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Optimal Divisionalization for Selling Networks of Cable Television Services

Author

Listed:
  • Joao Carlos Correia Leitao

    (University of Beira Interior)

Abstract

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.

Suggested Citation

  • Joao Carlos Correia Leitao, 2004. "Optimal Divisionalization for Selling Networks of Cable Television Services," Industrial Organization 0403004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0403004
    Note: Type of Document - pdf; pages: 17
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0403/0403004.pdf
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    References listed on IDEAS

    as
    1. Ramón Faulí-Oller & Lluís Bru & José Manuel Ordóñez de Haro, 2001. "Divisionalization In Vertical Structures," Working Papers. Serie AD 2001-28, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. 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.
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    5. Farrell, Joseph & Katz, Michael, 2001. "Competition or Predation? Schumpeterian Rivalry in Network Markets," Competition Policy Center, Working Paper Series qt6hs0v0pc, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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    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 223-236, March.
    13. Corchon, Luis C., 1991. "Oligopolistic competition among groups," Economics Letters, Elsevier, vol. 36(1), pages 1-3, May.
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    More about this item

    Keywords

    Cable Television; Divisionalization; Franchising.;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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