Monopoly Practices and Competitive Behaviour in the French Satellite Pay-TV Market Michele Cincera and Abdul G. Noury CEPR Discussion Paper #4174.

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Presentation transcript:

Monopoly Practices and Competitive Behaviour in the French Satellite Pay-TV Market Michele Cincera and Abdul G. Noury CEPR Discussion Paper #4174

Motivations As a result of technological progress in digital broadcasting industry there is a substantial decrease in prices and/or increase in quality of pay-TV services. To what extent such changes can be attributed to competition? To answer this question we compare the French competitive (pay-TV) market with the British monopolistic (pay-TV) industry. Before the comparison we analyse the nature of interactions between (rival) firms in the French pay-TV market.

Why France? The French SPTV market was characterized by a monopoly till 1997 but since then there are three firms competing together. Availability of monthly data that “allows” structural econometric estimations. The French competitive situation can be compared with the British or Italian monopolistic cases.

Related Literature Armstrong (1999) Harbord and Ottaviani (2002) Spence and Owen (1977) Nilssen and Sorgard (2000) Anderson and Coate (2002) Chipty (2001)

Data Monthly data collected from TeleSatellite magazine Variables: Subscription prices, number of subscribers, advertising effort, number of channels, and macroeconomic variables affecting demand: industrial production index, the number of unemployed, and seasonal dummies. Limits and advantages of the data

Market Shares

Descriptive Statistics

Methodology (Gasmi et al. 1992) Demand equation: Cost equation: Profit:

Système de 2 equations de demande et 2 conditions de 1er ordre à estimer:

Strategic Behavior Competitive (Nash) model Stackelberg with CanalSatellite as leader Stackelberg with TPS as leader Collusion on Price

Vuong Test Vuong (1989) developed a test for nonnested models. It is based on LR corrected for the number of estimated parameters. The test statistic is ass. Normal under the null hypothesis (i.e. both models are equivalent)

Comparison with the British Case Note the preliminary and static aspects of comparision. Is this result still valid across periods and/or space?

Conclusions Given the sample size, and assumption on functional forms, care must be taken when interpreting our results. Our structural estimations produces similar results for four competitive behaviours. Vuong test suggests that the data can best be explained by Stackelberg model with CanalSatellite as leader. A comparison with the British [and Italian case] show that despite similarities, packages of pay-TV services are cheaper in France. But, one needs more precise methods (hedonic regression) to reach firm conclusion on cross country comparisons.