Working Paper: CEPR ID: DP17446
Authors: Jerome Pouyet; David Martimort
Abstract: Pay-TV firms compete both downstream to attract viewers and upstream to acquire broadcasting rights. Because profits inherited from downstream competition satisfy a convexity property, allocating rights to the dominant firm maximizes the industry profit. Such an exclusive allocation of rights emerges as a robust equilibrium outcome but may fail to be welfare maximizing. We analyze whether a ban on resale and a ban on package bidding may improve welfare. These corrective policies have no impact on the final allocation but lead to profit redistribution along the value chain.
Keywords: broadcasting rights; upstream and downstream competition; exclusivity
JEL Codes: L13; L42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| allocation of broadcasting rights to the dominant firm (D45) | maximizes industry profit (L21) |
| convexity of profit functions in the downstream market (D43) | allocation of broadcasting rights to the dominant firm (D45) |
| allocation of broadcasting rights to the dominant firm (D45) | reduces consumer surplus (D11) |
| ban on resale (L42) | profit redistribution (D33) |
| ban on package bidding (D44) | profit redistribution (D33) |
| corrective policies (banning resale or package bidding) (L42) | influence profit distribution and market dynamics (D33) |