Working Paper: CEPR ID: DP8370
Authors: Gregory S. Crawford; Ali Yurukoglu
Abstract: We measure how the bundling of television channels affects 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.
Keywords: a la carte; bargaining; bundling; cable; counterfactual; econometrics; multichannel; Nash; product; pay; policy; price discrimination; regulation; satellite; structural estimation; television
JEL Codes: C31; C72; L50; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bundling of channels (C78) | higher negotiated input costs (D43) |
| la carte pricing (D49) | higher negotiated input costs (D43) |
| higher negotiated input costs (D43) | offset consumer benefits from purchasing individual channels (D16) |
| higher negotiated input costs (D43) | change in mean consumer surplus (D11) |
| higher negotiated input costs (D43) | change in total surplus (D69) |
| la carte pricing (D49) | reduce consumer welfare (D11) |
| la carte pricing (D49) | reduce total surplus (D61) |
| higher input costs (L11) | higher prices for consumers (D49) |