Last week, the DOJ announced that it filed a lawsuit against
DirecTV for orchestrating and agreement among its MVPD competitors to not carry
the Los Angeles Dodger’s channel distributed exclusively by Time Warner Cable
(TWC). In this one-period, simultaneous
move game where each competitor (DirecTV, AT&T, Cox, and Charter) was “separately”
negotiating a carriage agreement with TWC, the dominant strategy was to pay the
high price (estimated at $4.90/month). It
was in their collective interest (“optimal”), however, to negotiate a lower
price for the channel or to not carry the channel at all.
In a game of uncertainty, each firm would play its dominant
strategy. To get to the optimal outcome,
information on what competitors were up to and assurance to “stick with the
plan” was needed. Allegedly, DirecTV filled
that void.
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