Measuring consumer switching costs in the television industry

In this article, I develop and estimate a model of dynamic consumer behavior with switching costs in the market for paid-television services. I estimate the parameters of the structural model using data on cable and satellite systems across local US television markets over the period 1992-2006. The...

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Bibliographic Details
Published inThe Rand journal of economics Vol. 47; no. 2; pp. 366 - 393
Main Author Shcherbakov, Oleksandr
Format Journal Article
LanguageEnglish
Published Santa Monica Blackwell Publishing Ltd 01.07.2016
Wiley Periodicals, Inc
Rand Corporation
Subjects
Cable television industry
Consumer behavior
Economic models
Parameter estimation
Satellite television
Studies
United States > US
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Summary:In this article, I develop and estimate a model of dynamic consumer behavior with switching costs in the market for paid-television services. I estimate the parameters of the structural model using data on cable and satellite systems across local US television markets over the period 1992-2006. The results suggest switching costs range from $159 to $242 for cable and from $212 to $276 for satellite providers in 1997 dollars. Using a simple dynamic model of cable providers, I demonstrate that switching costs of these magnitudes can significantly affect the firms ' optimal strategies.
Bibliography:istex:81A3046F0F48F823333F214F5FBD2C1DBB7AE830
ark:/67375/WNG-X1BWH67T-V
ArticleID:RAND12131
I am deeply indebted to my supervisors, Gregory Crawford and Gautam Gowrisankaran, for their help at all stages of my work. I greatly acknowledge valuable advice and suggestions made by Daniel Ackerberg, Keisuke Hirano, and Aviv Nevo. Useful comments and suggestions made by Kathleen Nosal, Yuya Takahashi, Tim Lee, Nicolas Schutz, Philipp Schmidt‐Dengler, and anonymous referees are greatly appreciated. All errors are my own.
ISSN:0741-6261
1756-2171
DOI:10.1111/1756-2171.12131