Abstract

http://ssrn.com/abstract=1324175
 
 

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Dividing Bundled Surplus: The Case of the Cable Television Industry


Nodir Adilov


Indiana University-Purdue University

Peter J. Alexander


Federal Communications Commission

Brendan Michael Cunningham


U.S. Naval Academy

January 7, 2009


Abstract:     
A cable operator chooses to bundle or provide programs 'a la carte by striking a balance between the incentive to maximize total surplus and minimize transfer payments to program providers. Importantly, a cable operator's decision to bundle or provide programs 'a la carte maximizes total producer surplus if the cable operator's bargaining power (i.e., capacity to extract a greater share of surplus in negotiations with program suppliers) is sufficiently high. However, a cable operator in a weak bargaining position might strategically choose to bundle or unbundle viewer channels in order to enhance its bargaining position with individual program suppliers, even when this decision reduces total surplus. Thus, it is plausible that regulations which cap the market share or impose 'a la carte on cable operators may reduce total surplus.

Number of Pages in PDF File: 25

Keywords: Bundling, division of surplus, Nash bargaining

JEL Classification: C7, C78, D21, L82, L40

working papers series





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Date posted: January 7, 2009  

Suggested Citation

Adilov, Nodir and Alexander, Peter J. and Cunningham, Brendan Michael, Dividing Bundled Surplus: The Case of the Cable Television Industry (January 7, 2009). Available at SSRN: http://ssrn.com/abstract=1324175 or http://dx.doi.org/10.2139/ssrn.1324175

Contact Information

Nodir Adilov (Contact Author)
Indiana University-Purdue University ( email )
Nefff 340
2101 E. Coliseum Blvd.
Fort Wayne, IN 46835
United States
Peter J. Alexander
Federal Communications Commission ( email )
Washington, DC 20554
United States
Brendan Michael Cunningham
U.S. Naval Academy ( email )
Department of Economics
589 McNair Road
Annapolis, MD 21402
United States
410-293-6894 (Phone)
508-302-2596 (Fax)
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