Discussion Paper Details

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Title: Preference Externalities in Media Markets

Author(s): Simon P Anderson and Joel Waldfogel

Publication Date: September 2015

Keyword(s): broadcasting, differentiation, entry, media markets and preference externalities

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Anderson, S and Waldfogel, J. 2015. 'Preference Externalities in Media Markets'. London, Centre for Economic Policy Research.