Measuring consumer switching costs in the television industry

In this article, I develop and estimate a model of dynamic consumer behavior with switching costs in the market for paid-television services. I estimate the parameters of the structural model using data on cable and satellite systems across local US television markets over the period 1992-2006. The results suggest switching costs range from $159 to $242 for cable and from $212 to $276 for satellite providers in 1997 dollars. Using a simple dynamic model of cable providers, I demonstrate that switching costs of these magnitudes can significantly affect the firms' optimal strategies.