| Abstract: | We use aggregate firm-level price data and other related demographicvariables to examine the cost of switching between cable televisionand direct broadcast satellite (DBS). We find that switchingcosts appear to affect consumers' desire to switch from oneservice to another. We then use observation-specific dummy variablesthat stratify cable price to examine whether consumer behaviorvaries depending on the size of price change. We find that,when quality-adjusted prices for basic cable services increasesubstantially, subscribers will switch from cable to DBS, presumablyat the point at which the price change is larger than the costof switching. However, we find some evidence that DBS penetrationis suppressed in areas where cable operators offer regionalsports channels. |
