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The Effects of Competition on the Price for Cable Modem Internet Access

Author

Listed:
  • Yongmin Chen

    (University of Colorado at Boulder)

  • Scott J Savage

    (University of Colorado at Boulder)

Abstract
Theory suggests that a firm facing competition will raise prices as consumer preferences become more diverse, and with high enough diversity, a duopolist under product differentiation may price higher than a monopolist. Focusing on the price for cable modem Internet access, with or without DSL competition, and using the standard deviation of education attainment as a proxy for preference diversity, we find empirical support for these results. In markets where cable competes with DSL, the cable Internet price increases with preference diversity. Moreover, the cable Internet price under DSL competition can exceed that without competition when preferences are sufficiently diverse. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Yongmin Chen & Scott J Savage, 2011. "The Effects of Competition on the Price for Cable Modem Internet Access," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 201-217, February.
    • Handle: RePEc:tpr:restat:v:93:y:2011:i:1:p:201-217
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. “The Effects of Competition on Price for Cable Modem Internet Access,” Y. Chen & S. Savage (2009)
      by afinetheorem in A Fine Theorem on 2010-11-13 01:30:49
    2. “The Effects of Competition on Price for Cable Modem Internet Access,” Y. Chen & S. Savage (2009)
      by afinetheorem in A Fine Theorem on 2010-11-13 01:30:49

    Citations

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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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