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The welfare effects of vertical integration in multichannel television markets


Crawford, Gregory S; Lee, Robin S; Whinston, Michael D; Yurukoglu, Ali (2018). The welfare effects of vertical integration in multichannel television markets. Econometrica, 86(3):891-954.

Abstract

We investigate the welfare effects of vertical integration of regional sports networks (RSNs) with programming distributors in U.S. multichannel television markets. Vertical integration can enhance efficiency by reducing double marginalization and increasing carriage of channels, but can also harm welfare due to foreclosure and incentives to raise rivals' costs. We estimate a structural model of viewership, subscription, distributor pricing, and affiliate fee bargaining using a rich data set on the U.S. cable and satellite television industry (2000–2010). We use these estimates to analyze the impact of simulated vertical mergers and divestitures of RSNs on competition and welfare, and examine the efficacy of regulatory policies introduced by the U.S. Federal Communications Commission to address competition concerns in this industry.

Abstract

We investigate the welfare effects of vertical integration of regional sports networks (RSNs) with programming distributors in U.S. multichannel television markets. Vertical integration can enhance efficiency by reducing double marginalization and increasing carriage of channels, but can also harm welfare due to foreclosure and incentives to raise rivals' costs. We estimate a structural model of viewership, subscription, distributor pricing, and affiliate fee bargaining using a rich data set on the U.S. cable and satellite television industry (2000–2010). We use these estimates to analyze the impact of simulated vertical mergers and divestitures of RSNs on competition and welfare, and examine the efficacy of regulatory policies introduced by the U.S. Federal Communications Commission to address competition concerns in this industry.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Vertical integration, foreclosure, double marginalization, raising rivals’ costs, cable television
Language:English
Date:May 2018
Deposited On:30 Jul 2018 12:39
Last Modified:20 Sep 2018 04:32
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0012-9682
OA Status:Green
Publisher DOI:https://doi.org/10.3982/ECTA14031
Official URL:https://onlinelibrary.wiley.com/doi/abs/10.3982/ECTA14031

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