Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets

Posted: 16 Sep 2003

See all articles by Joel Waldfogel

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

Abstract

Theory predicts that in markets with increasing returns, the number of differentiated products, and the tendency to consume, will grow in market size. I document this phenomenon across 247 U.S. radio markets. By a mechanism that I term "preference externalities," an increase in the size of the market brings forth additional products valued by others with similar tastes. But who benefits whom? I document sharp differences in preferences between black and white, and between Hispanic and non-Hispanic, radio listeners. As a result, preference externalities are large and positive within groups, and they are much smaller and nonmonotonic across groups.

Suggested Citation

Waldfogel, Joel, Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets. RAND Journal of Economics, Vol. 34, No. 3. Available at SSRN: https://ssrn.com/abstract=429607

Joel Waldfogel (Contact Author)

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
United States

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
460
PlumX Metrics