Quality Overprovision in Cable Television Markets

Gregory S. Crawford, Oleksandr Shcherbakov and Matthew Shum ()

American Economic Review, 2019, vol. 109, issue 3, 956-95

Abstract: We measure the welfare distortions from endogenous quality choice in imperfectly competitive markets. For US cable television markets between 1997–2006, prices are 33 percent to 74 percent higher and qualities 23 percent to 55 percent higher than socially optimal. Such quality overprovision contradicts classic results in the literature and our analysis shows that it results from the presence of competition from high-end satellite TV providers: without the competitive pressure from satellite companies, cable TV monopolists would instead engage in quality degradation. For welfare, quality overprovision implies cable customers would prefer smaller, lower-quality cable bundles at a lower price, amounting to a twofold increase in consumer surplus for the average consumer.

JEL-codes: L13 L15 L82 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20151182
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20151182 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... kamjP-cmkGCbh2qyKAcL (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... 2lZ-IvwnCc3Vo7pVxvp0 (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:109:y:2019:i:3:p:956-95

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().