The Welfare Effects of Bundling in Multichannel Television Markets
Gregory S. Crawford, Ali Yurukoglu
American Economic Review · 2012 · Volume 102 · Issue 2
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 à 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 à 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)
Keywords
Consumer Economics: Empirical Analysis, Production, Pricing, and Market Structure, Size Distribution of Firms, Economics of Regulation, Entertainment, Media, Marketing
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