The cable TV market in Brazil

Abstract

The cable TV market goes through a crisis in Brazil. To understand the source of the crisis, this paper estimates a system of demand and supply equations for the cable TV market. It is found that the demand and the supply are very elastic with relation to price and income. Consequently, the markup charged by this market should be small. However, actually, there are high markups in this market. The explanation of this lies in the cable companies’ strategy of expansion. This is because the cable companies have engaged into a preemptive investment game, leading to a high idle capacity and a large market power.