Demand, Pricing, and Regulation: Evidence from the Cable TV Industry
Volume: Volume 22, No. 3
Issue: Autumn 1991
Pages: pp. 396-410
Authors: John W. Mayo and Yasuji Otsuka
Title: Demand, Pricing, and Regulation: Evidence from the Cable TV Industry
Abstract: Subsequent to the nationwide deregulation of the cable TV industry, a number of questions have been raised concerning the conduct of cable firms. Answers to these questions turn upon a fundamental set of issues regarding the economic relationships of demand, pricing, and regulation. In this article, we empirically examine these relationships for the period prior to deregulation. A number of basic findings emerge. Among these, we find that the demand for basic cable service ranges from being generally inelastic in rural areas to elastic in large urban markets. The elasticity of demand for pay cable services is typically well in excess of unity. Also, while regulation did not lead to economically efficient (marginal cost) prices for basic cable service, it did act to keep prices below monopoly levels. Moreover, our examination reveals some significant differences in the effectiveness of the various types of regulation practiced in the pre-deregulation period.
JEL Classification
Entertainment; Media Performing Arts, Visual Arts Broadcasting, Publishing, etc.
(L820)
Economics of Regulation (L510)
Industry Studies Services Entertainment, Recreation,
Tourism (6358)
Industry Studies Electrical, Gas,
Communication, and Information Services (6352)
Economics of Regulation (6190)