TY  - JOUR
AU  - Goolsbee,Austan
AU  - Petrin,Amil
TI  - The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8317
PY  - 2001
Y2  - June 2001
UR  - http://www.nber.org/papers/w8317
L1  - http://www.nber.org/papers/w8317.pdf
N1  - Author contact info:
Austan Goolsbee
Booth School of Business
University of Chicago
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-5869
Fax: 773/702-0458
E-Mail: goolsbee@chicagobooth.edu

Amil Petrin
Department of Economics
University of Minnesota
4-101 Hanson Hall
Minneapolis, MN 55455
Tel: 612/625-0145
Fax: 612/624-0209
E-Mail: petrin@umn.edu
AB  - This paper examines the introduction of Direct Broadcast Satellites as an alternative to cable television and the welfare gains such satellites generated for consumers.  The extent to which satellites compete with cable has become an important issue in the debate over re-regulation of cable prices.  We estimate a consumer level demand system for satellite, basic cable, premium cable and local antenna using extensive micro data on the television choices of more than 15,000 people as well as price and characteristics data on cable companies throughout the nation.  The results indicate that, after properly controlling for unobservable product attributes and the endogeneity of prices, the direct welfare gain to satellite buyers averages about $50 dollars per year or approximately $450 million annually in the aggregate. Estimates that do not control for unobserved attributes and endogenous prices overstate the welfare gains by almost a factor of fifteen.  The price sensitivity of satellite to both its own price and the price of cable is extremely high. The price sensitivity of cable, however, is low, likely indicating that satellite is not a close substitute at the time of our sample.
ER  -