Fixed Costs and the Product Market Treatment of Preference Minorities

28 Pages Posted: 26 Sep 2016

See all articles by Steven Berry

Steven Berry

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

Alon Eizenberg

Hebrew University of Jerusalem - 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

Multiple version iconThere are 2 versions of this paper

Date Written: September 2016

Abstract

We clarify the sense in which the market outcome may be biased against preference minorities, and estimate the degree of bias using an empirical model of entry into American radio broadcasting markets. Listening model estimates are used to infer fixed costs, and these estimates are then used to compute optimal station configurations as well as the welfare weights on different groups that rationalize the observed configuration. Welfare weights are 2 to 3 times higher for whites than for blacks, and 1.5 to 2 times higher for non‐Hispanic than for Hispanic, listeners. We explore the role of ‘importing’ and ‘exporting’ patterns in generating these findings.

Suggested Citation

Berry, Steven T. and Eizenberg, Alon and Waldfogel, Joel, Fixed Costs and the Product Market Treatment of Preference Minorities (September 2016). The Journal of Industrial Economics, Vol. 64, Issue 3, pp. 466-493, 2016, Available at SSRN: https://ssrn.com/abstract=2842857 or http://dx.doi.org/10.1111/joie.12124

Steven T. Berry (Contact Author)

Yale University - Department of Economics ( email )

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Alon Eizenberg

Hebrew University of Jerusalem - Department of Economics ( email )

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Joel Waldfogel

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

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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 )

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Minneapolis, MN 55455
United States

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