Managerial Economics and Business Strategy, Tenth Edition
By Michael R. Baye and Jeffrey T. Prince
Contents:
CHAPTER 1
The Fundamentals of Managerial Economics 1
HEADLINE: Amcott Loses $3.5 Million; Manager Fired 1
INTRODUCTION 2
The Manager 2
Economics 3
Managerial Economics Defined 3
THE ECONOMICS OF EFFECTIVE MANAGEMENT 4
Identify Goals and Constraints 4
Recognize the Nature and Importance of Profits 4
Economic versus Accounting Profits 4
The Role of Profits 5
The Five Forces Framework and Industry
Profitability 6
Understand Incentives 10
Understand Markets 11
Consumer–Producer Rivalry 11
Consumer–Consumer Rivalry 11
Producer–Producer Rivalry 11
Government and the Market 11
Recognize the Time Value of Money 12
Present Value Analysis 12
Present Value of Indefinitely Lived Assets 14
Use Marginal Analysis 16
Discrete Decisions 17
Continuous Decisions 19
Incremental Decisions 20
Make Data-Driven Decisions 21
Obtaining Estimates Using Regression 22
Evaluating the Statistical Significance of Estimated
Coefficients 24
Regression for Nonlinear Functions and Multiple
Regression 26
A Caveat 29
LEARNING MANAGERIAL ECONOMICS 29
ANSWERING THE HEADLINE 30
KEY TERMS AND CONCEPTS 30 / CONCEPTUAL AND
COMPUTATIONAL QUESTIONS 30 / PROBLEMS AND
APPLICATIONS 32 / SELECTED READINGS 37 /
APPENDIX A: THE CALCULUS OF MAXIMIZING NET
BENEFITS 37 / APPENDIX B: EVALUATING THE
OVERALL FIT OF THE REGRESSION LINE 38
INSIDE BUSINESS 1–1: The Goals of Firms in Our Global Economy 6
INSIDE BUSINESS 1–2: Profits and the Evolution of the Computer Industry 9
INSIDE BUSINESS 1–3: Joining the Jet Set 16
CHAPTER 2
Market Forces: Demand and Supply 40
HEADLINE: Samsung and Hynix Semiconductor to Cut Chip Production 40
INTRODUCTION 41
DEMAND 41
Demand Shifters 42
Income 43
Prices of Related Goods 44
Advertising and Consumer Tastes 45
Population 45
Consumer Expectations 46
Other Factors 46
The Demand Function 46
Consumer Surplus 48
SUPPLY 49
Supply Shifters 50
Input Prices 50
Technology or Government Regulations 50
Number of Firms 50
Substitutes in Production 51
Taxes 51
Producer Expectations 53
The Supply Function 53
Producer Surplus 54
MARKET EQUILIBRIUM 55
PRICE RESTRICTIONS AND MARKET EQUILIBRIUM 57
Price Ceilings 57
Price Floors 61
COMPARATIVE STATICS 62
Changes in Demand 63
Changes in Supply 64
Simultaneous Shifts in Supply and Demand 65
ANSWERING THE HEADLINE 67
SUMMARY 68 / KEY TERMS AND CONCEPTS 68 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 68 /
PROBLEMS AND APPLICATIONS 70 / SELECTED READINGS 73
INSIDE BUSINESS 2–1: Asahi Breweries Ltd. and the Asian Recession 44
INSIDE BUSINESS 2–2: International Trade Agreements and the Supply Curve 52
INSIDE BUSINESS 2–3: Unpopular Equilibrium Prices 56
INSIDE BUSINESS 2–4: Price Ceilings and Price Floors around the Globe 60
INSIDE BUSINESS 2–5: Globalization and the Supply of Automobiles 64
INSIDE BUSINESS 2–6: Using a Spreadsheet to Calculate Equilibrium in the Supply and Demand Model 65
CHAPTER 3
Quantitative Demand Analysis 74
HEADLINE: Walmart Hoping for Another Big Holiday Showing 74
INTRODUCTION 75
THE ELASTICITY CONCEPT 75
OWN PRICE ELASTICITY OF DEMAND 76
Elasticity and Total Revenue 77
Factors Affecting the Own Price Elasticity 80
Available Substitutes 81
Time 81
Expenditure Share 82
Marginal Revenue and the Own Price Elasticity of Demand 82
CROSS-PRICE ELASTICITY 84
INCOME ELASTICITY 87
OTHER ELASTICITIES 88
OBTAINING ELASTICITIES FROM DEMAND FUNCTIONS 89
Elasticities for Linear Demand Functions 89
Elasticities for Nonlinear Demand Functions 90
DATA-DRIVEN DEMAND CURVES 93
ANSWERING THE HEADLINE 96
SUMMARY 96 / KEY TERMS AND CONCEPTS 96 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 97 /
PROBLEMS AND APPLICATIONS 99 / SELECTED READINGS 102
INSIDE BUSINESS 3–1: Calculating and Using the Arc Elasticity: An Application to the Housing Market 80
INSIDE BUSINESS 3–2: Inelastic Demand for Prescription Drugs 83
INSIDE BUSINESS 3–3: Using Cross-Price Elasticities to Guide Strategies in Digital Markets 86
INSIDE BUSINESS 3–4: Using Big Data to Estimate
Demand Elasticities for Millions of Gamers 95
CHAPTER 4
The Theory of Individual Behavior 103
HEADLINE: Packaging Firm Uses Overtime Pay to
Overcome Labor Shortage 103
INTRODUCTION 104
CONSUMER BEHAVIOR 104
CONSTRAINTS 108
The Budget Constraint 108
Changes in Income 110
Changes in Prices 112
CONSUMER EQUILIBRIUM 113
COMPARATIVE STATICS 114
Price Changes and Consumer Behavior 114
Income Changes and Consumer Behavior 116
Substitution and Income Effects 118
APPLICATIONS OF INDIFFERENCE CURVE
ANALYSIS 119
Choices by Consumers 119
Buy One, Get One Free 119
Cash Gifts, In-Kind Gifts, and Gift Cards 120
Choices by Workers and Managers 123
A Simplified Model of Income–Leisure Choice 123
The Decisions of Managers 124
THE RELATIONSHIP BETWEEN INDIFFERENCE CURVE
ANALYSIS AND DEMAND CURVES 126
Individual Demand 126
Market Demand 127
ANSWERING THE HEADLINE 128
SUMMARY 129 / KEY TERMS AND CONCEPTS 129 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 130
/ PROBLEMS AND APPLICATIONS 132 / SELECTED
READINGS 135 / APPENDIX: A CALCULUS APPROACH
TO INDIVIDUAL BEHAVIOR 135
INSIDE BUSINESS 4–1: Indifference Curves and Risk
Preferences 107
INSIDE BUSINESS 4–2: The Budget Constraint and Credit Cards 111
INSIDE BUSINESS 4–3: Price Changes and Inventory
Management for Multiproduct Firms 115
INSIDE BUSINESS 4–4: Income Effects and the Business Cycle 117
INSIDE BUSINESS 4–5: The “Deadweight Loss” of In-Kind Gifts 124
INSIDE BUSINESS 4–6: Public Health Centers and
Output-Oriented Incentives 128
CHAPTER 5
The Production Process and Costs 137
HEADLINE: Boeing Loses the Battle but Wins the War 137
INTRODUCTION 138
THE PRODUCTION FUNCTION 138
Short-Run versus Long-Run Decisions 139
Measures of Productivity 140
Total Product 140
Average Product 140
Marginal Product 140
The Role of the Manager in the Production Process 142
Produce on the Production Function 142
Use the Right Level of Inputs 142
Algebraic Forms of Production Functions 145
Algebraic Measures of Productivity 146
Isoquants 148
Isocosts 150
Cost Minimization 151
Optimal Input Substitution 153
Data-Driven Production Functions 155
THE COST FUNCTION 156
Short-Run Costs 157
Average and Marginal Costs 158
Relations among Costs 160
Fixed and Sunk Costs 162
Algebraic Forms of Cost Functions 163
Long-Run Costs 164
Economies of Scale 165
Data-Driven Cost Functions 165
A Reminder: Economic Costs versus Accounting Costs 166
MULTIPLE-OUTPUT COST FUNCTIONS 167
Economies of Scope 167
Cost Complementarity 167
ANSWERING THE HEADLINE 169
SUMMARY 170 / KEY TERMS AND CONCEPTS 170 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 171 /
PROBLEMS AND APPLICATIONS 173 / SELECTED
READINGS 177 / APPENDIX: THE CALCULUS OF
PRODUCTION AND COSTS 177
INSIDE BUSINESS 5–1: Where Does Technology Come From? 144
INSIDE BUSINESS 5–2: Artificial Intelligence and Cost-Minimizing Inputs 154
INSIDE BUSINESS 5–3: The Affordable Care Act,
Employer Mandate, and Input Substitution 157
INSIDE BUSINESS 5–4: International Companies Exploit Economies of Scale 166
CHAPTER 6
The Organization of the Firm 179
HEADLINE: AT&T Finalizes Acquisition of Time Warner Inc. 179
INTRODUCTION 180
METHODS OF PROCURING INPUTS 181
Purchase the Inputs Using Spot Exchange 181
Acquire Inputs under a Contract 181
Produce the Inputs Internally 182
TRANSACTION COSTS 182
Types of Specialized Investments 183
Site Specificity 183
Physical-Asset Specificity 183
Dedicated Assets 184
Human Capital 184
Implications of Specialized Investments 184
Costly Bargaining 184
Underinvestment 184
Opportunism and the “Hold-Up Problem” 185
OPTIMAL INPUT PROCUREMENT 186
Spot Exchange 186
Contracts 187
Vertical Integration 190
The Economic Trade-Off 191
MANAGERIAL COMPENSATION AND THE
PRINCIPAL–AGENT PROBLEM 193
FORCES THAT DISCIPLINE MANAGERS 195
Incentive Contracts 195
External Incentives 196
Reputation 196
Takeovers 196
THE MANAGER–WORKER PRINCIPAL–AGENT PROBLEM 196
Solutions to the Manager–Worker Principal–Agent Problem 196
Profit Sharing 196
Revenue Sharing 196
Piece Rates 197
Time Clocks and Spot Checks 198
ANSWERING THE HEADLINE 199
SUMMARY 199 / KEY TERMS AND CONCEPTS 199 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 200
/ PROBLEMS AND APPLICATIONS 201 / SELECTED
READINGS 204 / APPENDIX: AN INDIFFERENCE CURVE
APPROACH TO MANAGERIAL INCENTIVES 204
INSIDE BUSINESS 6–1: The Cost of Using an Inefficient
Method of Procuring Inputs 186
INSIDE BUSINESS 6–2: What Determines Contract Length in Franchising? 190
INSIDE BUSINESS 6–3: The Role and Growth of Outsourcing 191
INSIDE BUSINESS 6–4: Incentives Matter for Performance 198
CHAPTER 7
The Nature of Industry 206
HEADLINE: T-Mobile and Sprint Finalize Merger 206
INTRODUCTION 207
MARKET STRUCTURE 207
Firm Size 207
Industry Concentration 208
Measures of Industry Concentration 209
The Concentration of U.S. Industry 210
Limitations of Concentration Measures 211
Technology 212
Demand and Market Conditions 213
Potential for Entry 215
CONDUCT 216
Pricing Behavior 216
Integration and Merger Activity 217
Vertical Integration 218
Horizontal Integration 218
Conglomerate Mergers 219
Research and Development 219
Advertising 220
PERFORMANCE 220
Profits 220
Social Welfare 220
THE STRUCTURE–CONDUCT–
PERFORMANCE PARADIGM 221
The Causal View 221
The Feedback Critique 221
Relation to the Five Forces Framework 222
OVERVIEW OF THE REMAINDER OF THE BOOK 223
Perfect Competition 223
Monopoly 223
Oligopoly 224
ANSWERING THE HEADLINE 225
SUMMARY 225 / KEY TERMS AND CONCEPTS 226 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 226
/ PROBLEMS AND APPLICATIONS 227 / SELECTED READINGS 230
INSIDE BUSINESS 7–1: The 2017 North American Industry Classification System (NAICS) 213
INSIDE BUSINESS 7–2: The Elasticity of Demand at the Firm and Market Levels 215
INSIDE BUSINESS 7–3: The Evolution of Market Structure in the Computer Industry 224
CHAPTER 8
Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets 231
HEADLINE: McDonald’s New Buzz: Specialty Coffee 231
INTRODUCTION 232
PERFECT COMPETITION 232
Demand at the Market and Firm Levels 233
Short-Run Output Decisions 234
Maximizing Profits 234
Minimizing Losses 237
The Short-Run Firm and Industry Supply Curves 240
Long-Run Decisions 242
MONOPOLY 243
Monopoly Power 243
Sources of Monopoly Power 245
Economies of Scale 245
Economies of Scope 246
Cost Complementarity 246
Patents and Other Legal Barriers 246
Maximizing Profits 247
Marginal Revenue 247
The Output Decision 251
The Absence of a Supply Curve 253
Multiplant Decisions 254
Implications of Entry Barriers 255
MONOPOLISTIC COMPETITION 257
Conditions for Monopolistic Competition 257
Profit Maximization 258
Long-Run Equilibrium 260
Implications of Product Differentiation 262
OPTIMAL ADVERTISING DECISIONS 263
ANSWERING THE HEADLINE 265
SUMMARY 265 / KEY TERMS AND CONCEPTS 266 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 266
/ PROBLEMS AND APPLICATIONS 268 / SELECTED
READINGS 272 / APPENDIX: THE CALCULUS OF PROFIT
MAXIMIZATION 272 / APPENDIX: THE ALGEBRA OF
PERFECTLY COMPETITIVE SUPPLY FUNCTIONS 273
INSIDE BUSINESS 8–1: Peugeot-Citroen of France: A
Price-Taker in China’s Auto Market 238
INSIDE BUSINESS 8–2: Patent, Trademark, and Copyright Protection 248
INSIDE BUSINESS 8–3: Product Differentiation, Cannibalization, and Colgate’s Smile 258
CHAPTER 9
Basic Oligopoly Models 274
HEADLINE: Crude Oil Prices Fall, but Consumers in
Some Areas See No Relief at the Pump 274
INTRODUCTION 275
CONDITIONS FOR OLIGOPOLY 275
THE ROLE OF BELIEFS AND STRATEGIC INTERACTION 275
PROFIT MAXIMIZATION IN FOUR OLIGOPOLY SETTINGS 277
Sweezy Oligopoly 277
Cournot Oligopoly 278
Reaction Functions and Equilibrium 279
Isoprofit Curves 283
Changes in Marginal Costs 285
Collusion 287
Stackelberg Oligopoly 289
Bertrand Oligopoly 292
COMPARING OLIGOPOLY MODELS 294
Cournot 294
Stackelberg 295
Bertrand 295
Collusion 295
CONTESTABLE MARKETS 296
ANSWERING THE HEADLINE 297
SUMMARY 298 / KEY TERMS AND CONCEPTS 299 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 299 /
PROBLEMS AND APPLICATIONS 301 / SELECTED
READINGS 304 / APPENDIX: DIFFERENTIATEDPRODUCT
BERTRAND OLIGOPOLY 305
INSIDE BUSINESS 9–1: OPEC Members Can’t Help but Cheat 288
INSIDE BUSINESS 9–2: Commitment in Stackelberg Oligopoly 290
INSIDE BUSINESS 9–3: Price Competition and the
Number of Sellers: Evidence from Online and Laboratory Markets 293
INSIDE BUSINESS 9–4: Using a Spreadsheet to Calculate
Cournot, Stackelberg, and Collusive Outcomes 296
CHAPTER 10
Game Theory: Inside Oligopoly 306
HEADLINE: Bring Back Complimentary Drinks! 306
INTRODUCTION 307
OVERVIEW OF GAMES AND STRATEGIC THINKING 307
SIMULTANEOUS-MOVE, ONE-SHOT GAMES 308
Theory 308
Applications of One-Shot Games 312
Pricing Decisions 312
Advertising and Quality Decisions 313
Coordination Decisions 314
Monitoring Employees 315
Nash Bargaining 316
INFINITELY REPEATED GAMES 318
Theory 318
Review of Present Value 318
Supporting Collusion with Trigger Strategies 318
Factors Affecting Collusion in Pricing Games 321
Number of Firms 321
Firm Size 321
History of the Market 321
Punishment Mechanisms 322
An Application of Infinitely Repeated Games to
Product Quality 323
FINITELY REPEATED GAMES 324
Games with an Uncertain Final Period 324
Repeated Games with a Known Final Period:
The End-of-Period Problem 327
Applications of the End-of-Period Problem 328
Resignations and Quits 328
The “Snake-Oil” Salesman 329
MULTISTAGE GAMES 329
Theory 329
Applications of Multistage Games 332
The Entry Game 332
Innovation 333
Sequential Bargaining 334
ANSWERING THE HEADLINE 336
SUMMARY 336 / KEY TERMS AND CONCEPTS 337 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 337
/ PROBLEMS AND APPLICATIONS 340 / SELECTED
READINGS 344
INSIDE BUSINESS 10–1: Hollywood’s (not so) Beautiful
Mind: Nash or “Opie” Equilibrium? 311
INSIDE BUSINESS 10–2: Cola Wars in India 313
INSIDE BUSINESS 10–3: Collusion in Canadian Gasoline
Markets 322
INSIDE BUSINESS 10–4: Multimarket Contact and Price
Competition 324
INSIDE BUSINESS 10–5: Entry Strategies in International
Markets: Sprinkler or Waterfall? 331
CHAPTER 11
Pricing Strategies for Firms with Market
Power 345
HEADLINE: Mickey Mouse Lets You Ride “for Free” at
Disney World 345
INTRODUCTION 346
BASIC PRICING STRATEGIES 346
Review of the Basic Rule of Profit Maximization 346
A Simple Pricing Rule for Monopoly and Monopolistic
Competition 347
A Simple Pricing Rule for Cournot Oligopoly 350
STRATEGIES THAT YIELD EVEN GREATER
PROFITS 352
Extracting Surplus from Consumers 352
Price Discrimination 352
Two-Part Pricing 356
Block Pricing 359
Commodity Bundling 361
Pricing Strategies for Special Cost
and Demand Structures 363
Peak-Load Pricing 363
Cross-Subsidies 364
Transfer Pricing 365
Pricing Strategies in Markets with Intense
Price Competition 367
Price Matching 367
Inducing Brand Loyalty 368
Randomized Pricing 369
ANSWERING THE HEADLINE 370
SUMMARY 371 / KEY TERMS AND CONCEPTS 371 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 372
/ PROBLEMS AND APPLICATIONS 374 / SELECTED
READINGS 377
INSIDE BUSINESS 11–1: Pricing Markups as Rules of
Thumb 348
INSIDE BUSINESS 11–2: Is Price Discrimination Bad for
Consumers? 357
INSIDE BUSINESS 11–3: Bundling to Reduce Churn in
Telecommunications 362
INSIDE BUSINESS 11–4: The Prevalence of
Price-Matching Policies and Other Low-Price
Guarantees 368
INSIDE BUSINESS 11–5: Kroger Combines Pricing
Strategies 369
INSIDE BUSINESS 11–6: Randomized Pricing in the
Airline Industry 370
CHAPTER 12
The Economics of Information 378
HEADLINE: Firm Chickens Out in the FCC Spectrum
Auction 378
INTRODUCTION 379
THE MEAN AND THE VARIANCE 379
UNCERTAINTY AND CONSUMER BEHAVIOR 381
Risk Aversion 381
Managerial Decisions with Risk-Averse
Consumers 382
Consumer Search 384
UNCERTAINTY AND THE FIRM 386
Risk Aversion 387
Producer Search 389
Profit Maximization 389
UNCERTAINTY AND THE MARKET 390
Asymmetric Information 390
Adverse Selection 392
Moral Hazard 393
Signaling and Screening 394
AUCTIONS 396
Types of Auctions 397
English Auction 397
First-Price, Sealed-Bid Auction 397
Second-Price, Sealed-Bid Auction 398
Dutch Auction 398
Information Structures 399
Independent Private Values 399
Correlated Value Estimates 400
Optimal Bidding Strategies for Risk-Neutral Bidders 400
Strategies for Independent Private Values Auctions 400
Strategies for Correlated Values Auctions 402
Expected Revenues in Alternative Types of
Auctions 403
ANSWERING THE HEADLINE 405
SUMMARY 406 / KEY TERMS AND CONCEPTS 406 /
CONCEPTUAL AND COMPUTATIONAL QUESTIONS 406
/ PROBLEMS AND APPLICATIONS 408 / SELECTED READINGS 411
INSIDE BUSINESS 12–1: Risk Aversion and the Value of Selling the Firm: The St. Petersburg Paradox 382
INSIDE BUSINESS 12–2: Obfuscation to Counter Low Internet Search Costs 385
INSIDE BUSINESS 12–3: Groucho Marx the Economist? 392
INSIDE BUSINESS 12–4: Second-Price Auctions on eBay 398
INSIDE BUSINESS 12–5: Auctions with Risk-Averse Bidders 405
MODULE GROUP A
Strategies to Change the Business Environment 412
INTRODUCTION 412
MODULE 1: ENTRY PREVENTION 412
Limit Pricing to Prevent Entry 413
Theoretical Basis for Limit Pricing 413
Limit Pricing May Fail to Deter Entry 414
Linking the Preentry Price to Postentry Profits 415
Commitment Mechanisms 415
Learning Curve Effects 416
Incomplete Information 417
Reputation Effects 417
Dynamic Considerations 418
KEY TERMS AND CONCEPTS 420 / PRACTICE PROBLEMS 420
INSIDE BUSINESS M1–1: Limit Pricing and the “Southwest Effect” 419
MODULE 2: LESSENING COMPETITION 421
Predatory Pricing 422
Raising Rivals’ Costs 424
Strategies Involving Marginal Cost 425
Strategies Involving Fixed Costs 426
Strategies for Vertically Integrated Firms 426
KEY TERMS AND CONCEPTS 427 / PRACTICE PROBLEMS 427
INSIDE BUSINESS M2–1: Business Strategy at Microsoft 424
MODULE 3: RESTRUCTURING GAME TIMING 429
First-Mover Advantages 429
Second-Mover Advantages 432
KEY TERMS AND CONCEPTS 432 / PRACTICE PROBLEMS 432
INSIDE BUSINESS M3–1: First to Market, First to Succeed? Or First to Fail? 431
MODULE 4: OVERCOMING NETWORK EFFECTS 434
What Is a Network? 434
Network Externalities 435
First-Mover Advantages Due to Consumer Lock-In 436
Using Penetration Pricing to “Change the Game” 437
KEY TERMS AND CONCEPTS 438 / PRACTICE
PROBLEMS 439 / SELECTED READINGS 439
INSIDE BUSINESS M4–1: Network Externalities and
Penetration Pricing by Yahoo! Auctions 437
MODULE GROUP B
Government in the Marketplace 441
INTRODUCTION 441
MODULE 5: REGULATORY CONSTRAINT ON MARKET POWER 441
Market Power 441
Government Tools to Constrain Market Power 442
Antitrust Policy 443
Price Regulation 446
Rent Seeking 449
KEY TERMS AND CONCEPTS 451 / PRACTICE PROBLEMS 451
INSIDE BUSINESS M5–1: European Commission Moves to Protect Small Businesses 444
INSIDE BUSINESS M5–2: Electricity Deregulation 448
MODULE 6: REGULATION OF MARKETS WITH EXTERNALITIES, PUBLIC GOODS, OR INCOMPLETE INFORMATION 454
Externalities 454
The Clean Air Act 456
Public Goods 458
Incomplete Information 461
Rules against Insider Trading 462
Certification 462
Truth in Lending 463
Truth in Advertising 463
Enforcing Contracts 465
KEY TERMS AND CONCEPTS 465 / PRACTICE PROBLEMS 465
INSIDE BUSINESS M6–1: Canada’s Competition Bureau 464
MODULE 7: GOVERNMENT POLICY AND INTERNATIONAL MARKETS 467
Quotas 467
Tariffs 469
Lump-Sum Tariffs 469
Excise Tariffs 470
KEY TERMS AND CONCEPTS 471 / PRACTICE PROBLEMS 471 / SELECTED READINGS 472
CASE STUDY
Spectrum—the Spawn of Time Warner
Cable and Charter Communications—
Navigates Challenges from Cord Cutting
and Mobile Competition 473
HEADLINE 474
BACKGROUND 475
Time Warner Cable History 475
Cable Television History 475
Broadband Internet 476
BUSINESS AND MARKETS 477
Video Programming 477
Internet Services 479
Telephone 479
COMPETITION 480
Cable Companies 480
Comcast 480
Comcast/Time Warner Cable Proposed
Acquisition 481
Charter Communications 481
Other Cable Players 482
Satellite 482
AT&T DirecTV 482
Dish Network 483
Telephone Providers 483
Verizon 483
AT&T 483
Other Companies 484
Online Video Distributors 484
Netflix 484
Amazon Prime Video 485
Hulu 485
Google/YouTube 485
SUPPLIERS 486
Cable Networks 486
Broadcast Networks 486
Sports Programming 487
Carriage Disputes 487
Over-the-Top Content 488
MARKET TRENDS AND CONSUMER BEHAVIOR 488
Digital Video Recorders (DVRs) 488
Cutting the Cord 489
Going Mobile 489
REGULATION IN THE CABLE INDUSTRY 489
Carriage of Broadcast Television 490
Cable Pricing Regulation 490
Net Neutrality 490
Connect America Fund 490
CHALLENGES 490
CASE-BASED EXERCISES 491
MEMOS 491
SELECTED READINGS AND REFERENCES 498/
APPENDIX: EXHIBITS 499
Glossary 503
Additional Readings and References 511
Name Index 530
General Index 536