IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v85y2003i4p962-970.html
   My bibliography  Save this article

On Measuring Competitive Viability and Monopoly Power in Cable: An Empirical Cost Approach

Author

Listed:
  • Mary T. Kelly

    (Villanova University)

  • John S. Ying

    (University of Delaware)

Abstract

This study provides empirical evidence concerning the economic feasibility of competition in the local market for video-delivery services. Using responses from the FCC's 1995 cost survey, we jointly estimate a translog cost function with factor share equations. To evaluate subadditivity, the fitted total cost of each firm is compared with the cost of two firms providing the same total output in eleven different market scenarios. Although costs were mildly superadditive, in the vast majority of cases they were lower when one firm provided the output. Average cost savings with respect to a monopoly were fairly small, ranging from 1.37% with a 10% market overlap to 5.05% with a complete overbuild. We also calculated marginal cost from the fitted total cost equation, and a price for cable services derived from the FCC survey data. Using these results and Rubinovitz's price elasticity of - 1.46, we estimated that reregulation had a regulatory effectiveness of 0.3251 and held prices to 40.5% of the monopoly level. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Mary T. Kelly & John S. Ying, 2003. "On Measuring Competitive Viability and Monopoly Power in Cable: An Empirical Cost Approach," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 962-970, November.
  • Handle: RePEc:tpr:restat:v:85:y:2003:i:4:p:962-970
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465303772815862
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. David P. Byrne, 2015. "Testing Models Of Differentiated Products Markets: Consolidation In The Cable Tv Industry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(3), pages 805-850, August.
    3. Byrne, D. P. & Imai, S. & Jain, N. & Sarafidis, V. & Hirukawa, M., 2020. "Identification and Estimation of Differentiated Products Models using Cost Data," Working Papers 15/05, Department of Economics, City University London.
    4. Sutirtha Bagchi & Jagadeesh Sivadasan, 2017. "Barriers to Entry and Competitive Behavior: Evidence from Reforms of Cable Franchising Regulations," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 510-558, September.
    5. Bikram Ghosh & Subramanian Balachander, 2007. "Research Note--Competitive Bundling and Counterbundling with Generalist and Specialist Firms," Management Science, INFORMS, vol. 53(1), pages 159-168, January.
    6. David P. Byrne & Susumu Imai & Vasilis Sarafidis & Masayuki Hirukawa, 2015. "Instrument-free Identification and Estimation of Differentiated Products Models," Working Paper Series 26, Economics Discipline Group, UTS Business School, University of Technology, Sydney.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:85:y:2003:i:4:p:962-970. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.