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Measuring the Effect of Multimarket Contact on Competition: Evidence from Mergers Following Radio Broadcast Ownership Deregulation

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Listed:
  • Waldfogel Joel

    () (Wharton School, University of Pennsylvania and NBER)

  • Wulf Julie

    () (Wharton School, University of Pennsylvania)

Abstract

This paper examines the effects of multimarket contact on advertising prices in the U.S. radio broadcasting industry. While it is in general difficult to measure the effect of multimarket contact on competition, the 1996 Telecommunications Act substantially relaxed local radio ownership restrictions, giving rise to a major and exogenous consolidation wave. Between the years of 1995 to 1998, the average extent of multimarket contact in major U.S. media markets increased by 2.5 times. Importantly, the extent of change in multimarket contact varies across markets, and the change in multimarket contact varies separately from the change in concentration. Using a panel data set on 248 geographic U.S. radio broadcast markets, 1995-1998, we find that multimarket contact has little effect on advertising prices. This paper contributes to the empirical literature on multimarket contact by analyzing a different industrial context and using longitudinal data surrounding an ownership deregulation.

Suggested Citation

  • Waldfogel Joel & Wulf Julie, 2006. "Measuring the Effect of Multimarket Contact on Competition: Evidence from Mergers Following Radio Broadcast Ownership Deregulation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-25, July.
  • Handle: RePEc:bpj:bejeap:v:contributions.5:y:2006:i:1:n:17
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    Citations

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    Cited by:

    1. Robert M. Feinberg, 2015. "“Exports-at-Risk”: The Effect of Multimarket Contact in International Trade," Southern Economic Journal, Southern Economic Association, vol. 81(3), pages 769-781, January.
    2. Hernández-Murillo, Rubén & Llobet, Gerard & Fuentes, Roberto, 2010. "Strategic online banking adoption," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1650-1663, July.
    3. Zhang, Yahua & Round, David K., 2011. "Price wars and price collusion in China's airline markets," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 361-372, July.
    4. Beomjoon Shim & Ahmed Khwaja, 2017. "The Collusive Effect of Multimarket Contact on Prices: Evidence from Retail Lumber Markets," 2017 Meeting Papers 593, Society for Economic Dynamics.
    5. Hernández-Murillo, Rubén & Llobet, Gerard & Fuentes, Roberto, 2010. "Strategic online banking adoption," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1650-1663, July.
    6. Haizhen Lin & Ian M. McCarthy, 2018. "Multimarket Contact in Health Insurance: Evidence from Medicare Advantage," NBER Working Papers 24486, National Bureau of Economic Research, Inc.
    7. Coccorese, Paolo & Pellecchia, Alfonso, 2013. "Multimarket contact, competition and pricing in banking," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 187-214.
    8. Ciliberto, Federico & Williams, Jonathan, 2010. "Does Multimarket Contact Facilitate Tacit Collusion? Inference on Conjectural Parameters in the Airline Industry," MPRA Paper 24888, University Library of Munich, Germany.

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