Efficiency Gain from Ownership Deregulation: Estimates for the Radio Industry
Reducing fixed cost duplication - a common justification for concentrated market structure - motivated the US government to relax the number of radio stations a firm could operate in any local market.� After deregulation the number of firms per market decreased.� The implied cost saving depends on the per market fixed costs incurred by each firm.� Using data from 140 markets we estimate upper and lower bounds to fixed costs using (i) an empirical model of gross profit and (ii) the assumption that the observed post-deregulation market structure is a Nash equilibrium.� The estimates suggest that the efficiency savings were significant.
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