Efficiency Gain from Ownership Deregulation: Estimates for the Radio Industry
32 Pages Posted: 9 Jun 2008
Date Written: February 2008
Abstract
Reducing fixed cost duplication - a common justification for concentrated market structure - motivated the US government to relax the number of radio stations a firm could operate in any local market. After deregulation the number of firms per market decreased. The implied cost saving depends on the per market fixed costs incurred by each firm. Using data from 140 markets we estimate upper and lower bounds to fixed costs using (i) an empirical model of gross profit and (ii) the assumption that the observed post-deregulation market structure is a Nash equilibrium. The estimates suggest that the efficiency savings were significant.
Keywords: moment inequalities
JEL Classification: L10, L40, L82
Suggested Citation: Suggested Citation
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