Most-Favored Customers in the Cable Industry
Nodir Adilov and Peter Alexander.
Media Bureau Staff Research Paper 2002-14 (Sept 2002) explores the implications of most-favored-customer clauses in the cable industry. Adilov (Economics Dept., Cornell Univ.) and Alexander (FCC Media Bureau) show that the introduction of a most-favored-customer clause for large buyers will increase their profitability and that the seller’s profits may decrease.
The authors examine the experimental cable bargaining results of Bykowsky, Kwasnica, and Sharkey (OSP Working Paper 35, July 2002) and compare those results to those of their own model. They find that the results of the Bykowsky-Kwasnica-Sharkey experiments regarding the effect of a most-favored-customer agreement are consistent with their own findings.