The Microeconomics of Television Markets

Abstract

I consider the literature surrounding the television market. Two important issues in the literature are: the market's two-sided nature, and bundling of channels. I discuss how an asymmetric pricing structure arises in television markets. The literature on bundling in the television market is reviewed, with some authors finding that bundling is a first best solution. Other authors show that a la carte pricing is socially optimal. Interestingly, there is consensus that mixed bundling is unambiguously worse than pure bundling and a la carte. Public service broadcasting is described in four English speaking countries to provide context. Failures in the television market are identified and some policy responses are discussed. I include literature analysing a price cap on basic cable packages and a domestic content requirement.