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American Economic Review: Vol. 102 No. 2 (April 2012)

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The Welfare Effects of Bundling in Multichannel Television Markets

Article Citation

Crawford, Gregory S., and Ali Yurukoglu. 2012. "The Welfare Effects of Bundling in Multichannel Television Markets." American Economic Review, 102(2): 643-85.

DOI: 10.1257/aer.102.2.643

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)

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Authors

Crawford, Gregory S. (U Warwick)
Yurukoglu, Ali (Stanford U)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L51: Economics of Regulation
L82: Entertainment; Media
M31: Marketing


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