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Price-Quality Tradeoffs and Welfare Effects in Cable Television Markets

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  • Beard, T Randolph
  • Ekelund, Robert B.
  • Ford, George S.
  • Saba, Richard S.

Abstract

The Telecommunications Act of 1996 reduced restrictions on the cable TV industry, providing completely deregulated rates in March 1999. Prior to that time the cable industry was generally allowed to increase rates so long as additional channels were supplied. In this paper we develop a simple tradeoff between price and quality in order to calculate the welfare tradeoff to consumers of the provision of one additional satellite channel. Gauging the impact of this quality change on consumers alone, we conclude that the increase in consumer gains due to an extra channel provision are almost exactly counterbalanced by reductions due to price increases. This ceteris paribus calculation does not mean, of course, that dynamic supply effects from the provision and availability of more channels will not increase future competition and potential consumer benefits. Copyright 2001 by Kluwer Academic Publishers

Suggested Citation

  • Beard, T Randolph & Ekelund, Robert B. & Ford, George S. & Saba, Richard S., 2001. "Price-Quality Tradeoffs and Welfare Effects in Cable Television Markets," Journal of Regulatory Economics, Springer, vol. 20(2), pages 107-123, September.
    • Handle: RePEc:kap:regeco:v:20:y:2001:i:2:p:107-23
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    Cited by:

    1. Mary T Kelly & John S Ying, 2014. "Testing the Effectiveness of Regulation and Competition on Cable Television Rates," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 40(3), pages 387-404, June.
    2. Xie, Li & Kong, Chun, 2024. "Electricity user connection pricing strategy: The incomplete contract theory perspective," Energy Economics, Elsevier, vol. 132(C).
    3. T. Beard & Michael Stern, 2008. "Bounding consumer surplus by monopoly profits," Journal of Regulatory Economics, Springer, vol. 34(1), pages 86-94, August.
    4. Miguel González-Maestre & Francisco Martínez-Sánchez, 2015. "Quality choice and advertising regulation in broadcasting markets," Journal of Economics, Springer, vol. 114(2), pages 107-126, March.
    5. Greiner, Tanja & Sahm, Marco, 2018. "How effective are advertising bans? On the demand for quality in two-sided media markets," Information Economics and Policy, Elsevier, vol. 43(C), pages 48-60.

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