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Public radio in the United States: does it correct market failure or cannibalize commercial stations?

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  • Berry, Steven T.
  • Waldfogel, Joel

Abstract

Radio signals are pure public goods whose total value to society is the sum of their value to advertisers and listeners. Because broadcasters can capture only part of the value of their product as revenue, there is the potential for a classic problem of underprovision. Small markets have much less commercial program variety than larger markets, suggesting a possible underprovision problem. Public funding of radio broadcasting targets programming in three formats - news, classical music, and jazz - with at least some commercial competition. Whether public support corrects a market failure depends on whether the market would have provided similar services in the absence of public broadcasting. To examine this we ask whether public and commercial classical stations compete for listening share and revenue. We then directly examine whether public stations crowd out commercial stations. We find evidence consistent with the view that public broadcasting crowds out commercial programming in large markets, particularly in classical music and to a lesser extent in jazz. Although the majority of government subsidies to radio broadcasting are allocated to stations without commercial competition in their format (thereby possibly correcting inefficient market underprovision), roughly a quarter of subsidies support direct competition with existing commercial stations.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 71 (1999)
Issue (Month): 2 (February)
Pages: 189-211

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Handle: RePEc:eee:pubeco:v:71:y:1999:i:2:p:189-211

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Steven T. Berry & Joel Waldfogel, 1997. "Public Radio in the United States: Does It Correct Market Failure or Cannibalize Commercial Stations?," NBER Working Papers 6057, National Bureau of Economic Research, Inc.
  2. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  3. Steven Berry & Joel Waldfogel, 1996. "Free Entry and Social Inefficiency in Radio Broadcasting," NBER Working Papers 5528, National Bureau of Economic Research, Inc.
  4. Kingma, Bruce Robert, 1989. "An Accurate Measurement of the Crowd-Out Effect, Income Effect, and Price Effect for Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1197-1207, October.
  5. Khanna, Jyoti & Posnett, John & Sandler, Todd, 1995. "Charity donations in the UK: New evidence based on panel data," Journal of Public Economics, Elsevier, vol. 56(2), pages 257-272, February.
  6. David M. Cutler & Jonathan Gruber, 1995. "Does Public Insurance Crowd Out Private Insurance?," NBER Working Papers 5082, National Bureau of Economic Research, Inc.
  7. Bradford, David F. & Hildebrandt, Gregory G., 1977. "Observable preferences for public goods," Journal of Public Economics, Elsevier, vol. 8(2), pages 111-131, October.
  8. Posnett, John & Sandler, Todd, 1989. "Demand for charity donations in private non-profit markets : The case of the U.K," Journal of Public Economics, Elsevier, vol. 40(2), pages 187-200, November.
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