The Welfare Effects of Bundling in Multichannel Television Markets

Gregory Crawford and Ali Yurukoglu

American Economic Review, 2012, vol. 102, issue 2, 643-85

Abstract: We measure how the bundling of television channels affects short-run welfare. We estimate an industry model of viewership, demand, pricing, bundling, and input-market bargaining using data on ratings, purchases, prices, bundles, and input costs. We conduct simulations of a la carte policies that require distributors to offer individual channels for sale to consumers. We estimate that negotiated input costs rise by 103.0 percent under a la carte. These higher input costs offset consumer benefits from purchasing individual channels. Mean consumer and total surplus change by an estimated -- 5.4 to 0.2 percent and -- 1.7 to 6.0 percent, respectively. (JEL D12, L11, L51, L82, M31)

Date: 2012
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Working Paper: The Welfare Effects of Bundling in Multichannel Television Markets (2011)
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