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Does Regulation Drive Competition? Evidence from the Spanish Local TV Industry

Author

Listed:
  • Ricard Gil

    () (Carey Business School, Johns Hopkins University)

  • Mitsukuni Nishida

    () (Carey Business School, Johns Hopkins University)

Abstract

Although we have many tools to understand the effect of regulation on competition, we know little about the importance of enforcement in explaining the impact of regulation. For this purpose, this paper uses data from Spanish local television industry in Spain from 1995 through 2001, which provide an unique opportunity for examining how competition changes with the introduction of regulation and a posterior liberalization. During this period, the television industry transitioned from a state of alegality (no regulation in place) to being highly regulated and finally to being deregulated. Using a firm entry model from Bresnahan and Reiss (1990, 1991), we estimate local TV station entry thresholds by number of entrants across years. We decompose the ratio into the fixed costs and variable profits, and find both an increase in the fixed-costs ratios and decrease in the variable-profit ratios drive the departure in the entry threshold from the one in other years. We find the model parameters are informative about the nature of the regulation and how strongly the government enforces the regulation.

Suggested Citation

  • Ricard Gil & Mitsukuni Nishida, 2012. "Does Regulation Drive Competition? Evidence from the Spanish Local TV Industry," Working Papers 12-05, NET Institute.
  • Handle: RePEc:net:wpaper:1205
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    File URL: http://www.NETinst.org/Gil_12-05.pdf
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    References listed on IDEAS

    as
    1. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
    2. Gil, Ricard & Riera-Crichton, Daniel, 2011. "Price discrimination and competition in two-sided markets: Evidence from the Spanish local TV industry," IESE Research Papers D/894, IESE Business School.
    3. Mitsukuni Nishida, 2008. "Estimating a Model of Strategic Store-Network Choice," Working Papers 08-27, NET Institute, revised Nov 2008.
    4. Junichi Suzuki, 2013. "Land Use Regulation As A Barrier To Entry: Evidence From The Texas Lodging Industry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 495-523, May.
    5. Klein, Maury, 1990. "Competition and Regulation: The Railroad Model," Business History Review, Cambridge University Press, vol. 64(02), pages 311-325, June.
    6. Catherine Schaumans & Frank Verboven, 2008. "Entry and regulation: evidence from health care professions," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 949-972.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Regulation; Competition; Television; Liberalization;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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