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Royalties, Entry and Spectrum Allocation to Broadcasting

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Abstract

Optimal control theory is employed to characterize the socially optimal trajectory of the royalty per channel and the number of royalty-paying users of state-owned spectrum for broadcasting. The spectrum royalty is set by an omniscient public planner to maximize the sum of the discounted consumers’ utilities over an infinite planning horizon. The number of broadcasters adjusts over time to profits, while the quality of the industry’s service is determined by variety and reception. The trade-off between the benefits of greater variety and the costs of intensified interferences associated with the number of broadcasters is central to the analysis. The convergence of the socially optimal trajectory of the royalty per channel and the number of broadcasters to a steady state and the comparative statics of the steady state are analyzed.

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File URL: http://business.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/web/uow141010.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp13-02.

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Length: 23 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:uow:depec1:wp13-02

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Keywords: Broadcasting; Royalties; Spectrum; Optimal Control;

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  1. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  2. Thomas W. Hazlett & Roberto E. Muñoz, 2009. "A welfare analysis of spectrum allocation policies," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 424-454.
  3. Massimo Motta & Michele Polo, 1997. "Concentration and public policies in the broadcasting industry: the future of television," Economic Policy, CEPR & CES & MSH, vol. 12(25), pages 293-334, October.
  4. Brendan M. Cunningham & Peter J. Alexander, 2004. "A Theory of Broadcast Media Concentration and Commercial Advertising," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 557-575, October.
  5. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
  6. Thomas W. Hazlett, 2008. "Optimal Abolition of FCC Spectrum Allocation," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 103-128, Winter.
  7. Steven Berry & Joel Waldfogel, 1996. "Free Entry and Social Inefficiency in Radio Broadcasting," NBER Working Papers 5528, National Bureau of Economic Research, Inc.
  8. 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.
  9. Borenstein, Severin, 1988. "On the Efficiency of Competitive Markets for Operating Licenses," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 357-85, May.
  10. Webbink, Douglas W, 1973. "Regulation, Profits and Entry in the Television Broadcasting Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 21(2), pages 167-76, April.
  11. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
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