Working Paper: CEPR ID: DP4174
Authors: Michele Cincera; Abdul Noury
Abstract: This Paper uses monthly data from a differentiated market dominated by a duopoly to analyse the nature of interactions between competitor firms. The incumbent, Canal Satellite, and the entrant, TPS, have dominated the French satellite pay-TV market, characterized by a monopoly until the end of 1997. This Paper investigates the effects of the entry and tests for collusive behaviour by means of non-nested methods in this duopoly with differentiated products. The main findings reject collusive behaviours in favour of Stackelberg competition with the incumbent as the leader. A preliminary comparison with the UK Satellite pay-TV market characterized by a monopoly indicates that prices are substantially lower in France. In view of our results, we argue that the difference can be explained by more competition between firms in the French case.
Keywords: competition; media; pay-TV; structural models
JEL Codes: L22; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Entry of TPS (F16) | Subscription prices for Canal Satellite (Z23) |
| Increase in Canal Satellite's price (D49) | Decrease in subscription numbers for Canal Satellite (D49) |
| Increase in price for TPS (P22) | Quantity of subscriptions for TPS (D45) |
| Advertising expenditures (M37) | Firm's own demand (J23) |
| Advertising expenditures (M37) | Rival's demand (D43) |
| Canal Satellite (Z23) | Leader in Stackelberg competition (D43) |