Measuring consumer switching costs in the television industry

Content Provider	Semantic Scholar
Copyright Year	2007
Abstract	This paper develops and estimates a dynamic model of consumer behavior with switching costs in the market for paid television services. It is hypothesized that consumer choices of cable versus satellite providers are affected by the presence of switching costs, which in turn justifies forward-looking consumer behavior. The model allows for persistently heterogeneous consumer preferences. I estimate parameters of the structural model using data on cable and satellite systems across local U.S. television markets over the period 1997-2006. Estimation results suggest switching costs indeed exist in the television industry, amounting to approximately $109 and $186 (in 1997 dollars) for cable and satellite systems respectively. Implications of using a static environment or consumer myopia assumptions for the parameter estimates are discussed. A simple supply side model is used to recover the cost structure of cable providers and then to simulate counterfactual experiments measuring the effect of satellite entry on optimal cable policy choice.
File Format	PDF HTM / HTML
Alternate Webpage(s)	http://webrum.uni-mannheim.de/vwl/ashcherb/fileslib/switchingcosts.pdf
Language	English
Access Restriction	Open
Subject Keyword	Algorithm Category 5 cable Choice Behavior Choice modelling Counterfactual conditional Direct-broadcast satellite Discrete choice Elasticity (cloud computing) Elasticity (data store) Estimated Experiment Financial cost Fixed-Point Number Fixed-point iteration Genetic Heterogeneity Iterative method Mathematical model Money Monopoly Myopia Population Parameter REM Sleep Behavior Disorder Simulation Television
Content Type	Text
Resource Type	Article