Regulation, Enforcement, and Entry: Evidence from the Spanish Local TV Industry

37 Pages Posted: 27 Jun 2011 Last revised: 9 Jul 2015

Mitsukuni Nishida

Johns Hopkins University - Carey Business School

Ricard Gil

Johns Hopkins University - Carey Business School

Date Written: September 22, 2013

Abstract

Although we have many tools to understand the effect of regulation on firm entry, we know little about the importance of actual regulation enforcement. For this purpose, this paper uses data from Spain's local television industry from 1995 through 2001, which provide a unique opportunity for examining how firms' profitability changes with the introduction of regulation and a posterior liberalization. During this period, the local television industry transitioned from a state of alegality (no regulation in place) to being highly regulated and finally to being informally deregulated. Using a firm entry model from Bresnahan and Reiss (1990, 1991a,b), we estimate local TV station entry thresholds by number of entrants across years. We find the entry threshold in 1998 increased relative to the thresholds in 1995 and 2001, suggesting that entry was less attractive during the period when the local TV industry was highly regulated. We decompose the entry thresholds into the fixed costs and variable profits, and find the fixed-cost ratios increase in 1998 and stay constant in 2001. Meanwhile, we find an increase in the variable-profit ratios in 2001. These findings suggest that the informal deregulation did not invalidate the regulation introduced in 1995 on the cost side. However, the deregulation seemed to have an impact on variable profits through how local TV stations competed.

Keywords: regulation, market, competition, TV industry, liberalization

JEL Classification: L10, L51, L96

Suggested Citation

Nishida, Mitsukuni and Gil, Ricard, Regulation, Enforcement, and Entry: Evidence from the Spanish Local TV Industry (September 22, 2013). Available at SSRN: https://ssrn.com/abstract=1873227 or http://dx.doi.org/10.2139/ssrn.1873227

Mitsukuni Nishida (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://https://sites.google.com/site/mitsukuninishida/

Ricard Gil

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu

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