274 BOOK REVIEW considered, much attention was given to prices; Hazlett and Spitzer examine other evidence as well. Chapter 3 examines whether or not the necessary conditions for possible welfare- enhancing price controls hold in the cable television industry. Do cable operators actually exercise market power, restricting output below the competitive level, or does their dominance of local video markets stem from efﬁciency? Hazlett and Spitzer consider three types of evidence: q-ratios, pricing in sole-supplier markets compared to that in duopolistic markets, and case study evidence on whether or not lower-priced competitive entry is viable in average cable markets. All of the evi- dence indicates that cable television operators have, in fact, exercised considerable market power since at least the mid- to late-1980s, suggesting that rate regulation might in fact increase consumer welfare. Subsequent chapters explore the facts surrounding each change of regulatory regime within the cable television industry. To the extent that rate controls bind, cable operators will look for ways around the controls. While some aspects of pro- viding cable television service, such as the investment in cables, are sunk, program menus are highly mobile inputs. Cable operators are therefore likely to respond to binding price controls
Review of Industrial Organization – Springer Journals
Published: Oct 15, 2004
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