Topic: Competition and Dynamic Bargaining in the Broadband Industry
Speaker: Daniel Goetz,Princeton University
Time: Tuesday, March 21, 14:00-15:30
Place: Room 217, Guanghua Building 2
This paper measures the e ect of horizontal mergers in the broadband industry when content providers can invest in product quality. I estimate a structural model of dynamic multilateral
bargaining between U.S. broadband internet service providers (ISPs) and Netflix over how to split the surplus from investments Net ix makes to improve the quality of its streaming video. The dynamic bargaining model recovers the value and split of the investment surplus when the econometrician observes only bargaining durations and consumer responses to lowered stream quality. I nd that ISP scale|independently of ISP market power|matters for how much surplus ISPs extract, which is a novel source of bargaining power in the empirical literature. Using the model, I nd that allowing the two largest U.S. cable internet providers to merge would have increased the magnitude of aggregate consumer welfare loss by 4.3% due to a longer period of degraded Netflix quality, and reduced the probability of Netflix making the quality investments by between 0% and 5.1%.
Daniel Goetz received his PhD from Princeton University. His current research interest is mainly in Industrial Organization, Applied Microeconomics.
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