The Impact of the 1992 Cable Act on Household Demand and Welfare

TLDR

The study measures household benefits from the 1992 Cable Act, considering cable system responses to its regulations. A discrete‑choice differentiated‑product model of household demand, aggregated to market‑level data, is estimated on a cross‑section of cable markets before and after the act. Although the act required 10‑17% price cuts, cable system responses did not alter household welfare, with post‑act price changes accounting for most of the observed difference.

Abstract

I measure the benefit to households of the 1992 Cable Act in light of strategic responses by cable systems to the regulations mandated by the act. A discrete-choice differentiatedproduct model of household demand for all offered cable television services forms the basis of the analysis. Aggregation over households and service combinations to the level of the data permits estimation on a cross-section of cable markets from before and after the act. The results indicate that while the regulations mandated price reductions of 10‐17% for cable services, observed system responses yielded no change in household welfare. Post-act changes in cable prices are responsible for most of the difference.