Fixed Costs and the Product Market Treatment of Preference Minorities

Steven Berry, Alon Eizenberg, Joel Waldfogel

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)466-493
Number of pages28
JournalJournal of Industrial Economics
Volume64
Issue number3
DOIs
StatePublished - Sep 1 2016

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