The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television / Austan Goolsbee, Amil Petrin.

Format:

Book

Author/Creator:

Goolsbee, Austan.

Contributor:

National Bureau of Economic Research.

Petrin, Amil.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8317.

NBER working paper series no. w8317

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

This paper examines the introduction of Direct Broadcast Satellites as an alternative to cable television and the welfare gains such satellites generated for consumers. The extent to which satellites compete with cable has become an important issue in the debate over re-regulation of cable prices. We estimate a consumer level demand system for satellite, basic cable, premium cable and local antenna using extensive micro data on the television choices of more than 15,000 people as well as price and characteristics data on cable companies throughout the nation. The results indicate that, after properly controlling for unobservable product attributes and the endogeneity of prices, the direct welfare gain to satellite buyers averages about $50 dollars per year or approximately $450 million annually in the aggregate. Estimates that do not control for unobserved attributes and endogenous prices overstate the welfare gains by almost a factor of fifteen. The price sensitivity of satellite to both its own price and the price of cable is extremely high. The price sensitivity of cable, however, is low, likely indicating that satellite is not a close substitute at the time of our sample.

Notes:

Print version record

June 2001.