Journal of Econometrics

Volume 72, Issues 1–2, May–June 1996, Pages 357-395

The effects of vertical integration between cable television systems and pay cable networks rights and content


Using data for 1646 cable systems, we find that vertical integration between pay cable programming networks and cable systems has substantial effects on final market outcomes. Cable systems owned by the two multiple system operators (MSOs) having majority ownership ties to four major pay networks tended to carry their affiliated networks more frequently and rival networks less frequently than did the average nonintegrated system. These systems also offered fewer pay networks in total than did the average nonintegrated system. We also find that when carriage differences are accounted for, integrated systems tended to ‘favor’ their affiliated networks with respect to pricing or other marketing behavior. The models we employ are obtained from a model selection technique involving backward elimination and the Schwarz criterion.


Model selection
Schwarz criterion

JEL classification


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We are grateful to A.C. Nielson Co. for providing much of the data used in this paper and to the anonymous referees and various seminar participants for their helpful comments. We particularly thank Richard Blundell for his support. Any errors are our own.

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