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

  • Ricard Gil

    ()

    (Carey Business School, Johns Hopkins University)

  • Mitsukuni Nishida

    ()

    (Carey Business School, Johns Hopkins University)

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.

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File URL: http://www.NETinst.org/Gil_12-05.pdf
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Paper provided by NET Institute in its series Working Papers with number 12-05.

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Length: 37 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:net:wpaper:1205
Contact details of provider: Web page: http://www.NETinst.org/

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  1. Griffith, Rachel & Harmgart, Heike, 2008. "Supermarkets and Planning Regulation," CEPR Discussion Papers 6713, C.E.P.R. Discussion Papers.
  2. 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, 05.
  3. 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.
  4. Mitsukuni Nishida, 2008. "Estimating a Model of Strategic Store-Network Choice," Working Papers 08-27, NET Institute, revised Nov 2008.
  5. 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.
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