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Beyond the Spectrum Constraint: Concentration and Entry in the Broadcasting Industry

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  • Massimo Motta
  • Michele Polo

Abstract

The broadcasting industry is still very concentrated all over the world, after 15 years in which new technologies and public policies allowed to overcome the constraint of limited availability of frequencies on the radio spectrum. We argue that the monopolistic competition set up, traditionally used to analyze the broadcasting industry, does not fit the empirical evidence. Instead we analyze the free entry equilibrium in a multistage game in which the decision on program quality (attractiveness) is crucial and the associated fixed costs are endogenously determined. We show that concentration might arise in the long run even in large markets despite entry is free.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 115.

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Handle: RePEc:igi:igierp:115

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  1. Irmen, Andreas & Thisse, Jacques-Francois, 1998. "Competition in Multi-characteristics Spaces: Hotelling Was Almost Right," Journal of Economic Theory, Elsevier, Elsevier, vol. 78(1), pages 76-102, January.
  2. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, Econometric Society, vol. 51(5), pages 1469-83, September.
  3. Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 91(1), pages 103-26, February.
  5. Massimo Motta & Michele Polo, 1997. "Concentration and public policies in the broadcasting industry: the future of television," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 12(25), pages 293-334, October.
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Cited by:
  1. Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum, Oslo University, Department of Economics 18/2001, Oslo University, Department of Economics.
  2. Nilssen,T. & Sorgard,L., 2000. "Strategic informative advertising in a TV-advertising duopoly," Memorandum, Oslo University, Department of Economics 17/2000, Oslo University, Department of Economics.
  3. Nilssen,T. & Sorgard,L., 2001. "Who are the advertisers?," Memorandum, Oslo University, Department of Economics 19/2001, Oslo University, Department of Economics.
  4. Nilssen, Tore & Sørgard, Lars, 2000. "TV Advertising, Program Quality, and Product-Market Oligopoly," Competition Policy Center, Working Paper Series, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley qt2zp943hj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.

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