Handbook of Media Economics, vol 1A

the gains to consumers would outweigh the losses to firms and t otal surplus would

increase.

77

There is an important weakness in these baseline results shared by previous papers

looking at this topic: they treat the affiliate fees paid by cable systems to programmers

as given. While consistent with most of the theory literature,

78

this is contrary to both

the nature of programming contracts in the pay-television industry (which typically

require systems to pay sometimes much higher fees if channels are offered à la carte)

as well as bargaining incentives in an à la carte world.

Crawford and Yurukoglu

(2012)

use their industry model of pay-television markets to evaluate the welfare effects

of à la carte allowing for renegotiation between programmers