Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126595
Authors: 
Crawford, Gregory S.
Shcherbakov, Oleksandr
Shum, Matthew
Year of Publication: 
2015
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 202
Abstract: 
We measure the welfare consequences of endogenous quality choice in imperfectly competitive markets. We introduce the concept of a "quality markup" and measure the relative welfare consequences of market power over price and quality. For U.S. paid-television markets during 1997-2006, we find that not only are cable monopolists' prices 33% to 74% higher than marginal costs, but qualities are also 23% to 55% higher than socially optimal and the welfare costs of each are similar in magnitude. Such evidence for "quality inflation" by monopolists is at odds with classic results in the literature.
Subjects: 
industrial organization
endogenous quality
imperfect competition
monopoly
cable television
pay television
welfare
quality markup
JEL: 
L15
L13
L82
L96
C51
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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