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Unformatted text preview: 1 2 Types of regula0on Maximum rates Min # of channels Possible ra0onale prevent monopoly abuse by high prices insure access for poor Prevent monopoly abuse by low svc quality insure city has modern infra-structure increase par0cipa0on in local democra0c process provide specialized programming for minority groups/ insure availability of service to poor or low density Public access channels interests Universal wiring of city neighborhoods First 2 relate to monopoly power; last 2 don't. However, govt regula0on oJen pursues a variety of goals simultaneously (not always explicitly). 3 Economies of scale and natural monopoly evidence: 1974 Rand study: economies of scale are large Owen/Geenlaugh's study: evidence of economies of scale Noam's study: some evidence of economies of scale Regulated vs. unregulated market evidence: Hazlet's study: rates higher when unregulated Entmann's study: more channels/$ when regulated Is economies of scale in cable TV sufficient to give cable TV market power? No compe00on from subs0tutes may limit cable TV's market power Alterna0ve media Conven0onal TV Subscrip0on TV Satellite master ant. VCRs types of entertainment geography news, general, movies, sports esp. in big ci0es esp in big ci0es esp. in big ci0es movies, sports movies, sports, general movies Live entertainment movies, sports, general esp. in big ci0es May have significant market power: 1. In rural areas for news and general entertainment 2. Specialized sports programming in all geographic areas 4 Franchised monopoly with regulated rates Regulators could set P=MC, but will need to be subsidized because costs>revenues Profit would be 0 if regula0on set P=AC Savings will be bigger if monopoly power was more significant Regulators may not know what they are doing or have enough informa0on so may do a poor job of segng P. Regulators may be tempted to pursue other goals besides efficiency (more access, more channels) which may not be valued Allowing mul0ple franchises to compete with each other If there is economies of scale, prices will be higher. 5 6 ...
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This note was uploaded on 01/18/2012 for the course PADP 8670 taught by Professor Staff during the Fall '10 term at University of Georgia Athens.
- Fall '10