Preference Externalities in Media Markets

62 Pages Posted: 21 Sep 2015

See all articles by Simon P. Anderson

Simon P. Anderson

University of Virginia - Department of Economics

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: September 2015

Abstract

Media industries typically exhibit two fundamental features, high fixed costs and heterogeneity of consumer preferences. Daily newspaper markets, for example, tend to support a single product. In other examples, such as radio broadcasting, markets often support multiple differentiated offerings. Both contexts can deliver preference externalities, when the options and well-being for consumers depend on the number and mix of consumers according to their content preferences. This chapter presents evidence on these fundamental features of media markets. We then incorporate these features into a suite of theoretical models to obtain both a description of media markets as well as predictions for how they would be expected to function. In a third section we turn to "results," i.e. empirical evidence on the questions illuminated by the theoretical models. We then explore the effects of technological change, and we suggest directions for future work.

Keywords: broadcasting, differentiation, entry, media markets, preference externalities

Suggested Citation

Anderson, Simon P. and Waldfogel, Joel, Preference Externalities in Media Markets (September 2015). CEPR Discussion Paper No. DP10835, Available at SSRN: https://ssrn.com/abstract=2663433

Simon P. Anderson (Contact Author)

University of Virginia - Department of Economics ( email )

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Joel Waldfogel

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

19th Avenue South
Minneapolis, MN 55455
United States

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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