Public Radio in the United States: Does it Correct Market Failure or Cannibalize Commercial Stations?

42 Pages Posted: 13 Jul 2000 Last revised: 5 Oct 2010

See all articles by Steven Berry

Steven Berry

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management; National Bureau of Economic Research (NBER); University of Minnesota - Twin Cities - Department of Economics

Date Written: June 1997

Abstract

Radio signals are pure public goods whose total value to society is the sum of their value to advertisers and listeners. Because broadcasters can capture only part of the value of their product as revenue, there is the potential for a classic problem of underprovision. Small markets have much less commercial program variety than larger markets, suggesting a possible underprovision problem. Public funding of radio broadcasting targets programming in three formats - news, classical music, and jazz - with at least some commercial competition. Whether public support corrects a market failure depends on whether the market would have provided similar services in the absence of public broadcasting. To examine this we ask whether public and commercial classical stations compete for listening share and revenue. We then directly examine whether public stations crowd out commercial stations. We find evidence consistent with the view that public broadcasting crowds out commercial programming in large markets, particularly in classical music and to a lesser extent in jazz. Although the majority of government subsidies to radio broadcasting are allocated to stations without commercial competition in their format (thereby possibly correcting inefficient market underprovision), roughly a quarter of subsidies support direct competition with existing commercial stations.

Suggested Citation

Berry, Steven T. and Waldfogel, Joel, Public Radio in the United States: Does it Correct Market Failure or Cannibalize Commercial Stations? (June 1997). NBER Working Paper No. w6057, Available at SSRN: https://ssrn.com/abstract=226467

Steven T. Berry (Contact Author)

Yale University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

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Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management ( email )

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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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