Prices of cable TV services are rising, leading to calls for the introduction of cable TV à la carte. This column argues against the proposal. Some would win while others would lose, but on average households would be no better off. Given the tremendous uncertainty associated with such a regulatory intervention, more convincing evidence of the consumer benefits is needed.
Jeremy Bulow, Paul Klemperer, 10 October 2012
Consumer surplus in any market equals the area between the demand curve and the industry marginal-revenue curve. This column argues this observation has powerful implications for understanding rent seeking and price controls. For example, a price control reduces consumer surplus in an otherwise-competitive market with convex demand whenever supply is more elastic than demand.
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