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Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets

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Author Info
 Waldfogel, Joel

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Abstract

Theory predicts that in markets with increasing returns, the number of differentiated products, and the tendency to consume, will grow in market size. I document this phenomenon across 247 U.S. radio markets. By a mechanism that I term "preference externalities," an increase in the size of the market brings forth additional products valued by others with similar tastes. But who benefits whom? I document sharp differences in preferences between black and white, and between Hispanic and non-Hispanic, radio listeners. As a result, preference externalities are large and positive within groups, and they are much smaller and nonmonotonic across groups. Copyright 2003 by the RAND Corporation.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 34 (2003)
Issue (Month): 3 (Autumn)
Pages: 557-68
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Handle: RePEc:rje:randje:v:34:y:2003:i:3:p:557-68

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March. [Downloadable!] (restricted)
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  2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  3. Bresnahan, Timothy F & Reiss, Peter C, 1990. "Entry in Monopoly Markets," Review of Economic Studies, Blackwell Publishing, vol. 57(4), pages 531-53, October. [Downloadable!] (restricted)
  4. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Blackwell Publishing, vol. 43(2), pages 217-35, June. [Downloadable!] (restricted)
  5. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May. [Downloadable!] (restricted)
  6. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn. [Downloadable!] (restricted)
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  7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
    Other versions:
  8. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
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  9. Steven T. Berry & Joel Waldfogel, 1999. "Mergers, Station Entry, and Programming Variety in Radio Broadcasting," NBER Working Papers 7080, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
  11. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Todd Sinai & Joel Waldfogel, 2003. "Geography and the Internet: Is the Internet a Substitute or a Complement for Cities?," NBER Working Papers 10028, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. David M. Cutler & Edward L. Glaeser & Jacob L. Vigdor, 2007. "When Are Ghettos Bad? Lessons from Immigrant Segregation in the United States," NBER Working Papers 13082, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2006. "Superstar Cities," NBER Working Papers 12355, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Guido De Blasio, 2006. "Does the Internet Kill the Distance? Evidence From Navigation, E-Commerce, and E-Banking," ERSA conference papers ersa06p440, European Regional Science Association. [Downloadable!]
  5. Eric Aldrich & Peter Arcidiacono & Jacob Vigdor, 2005. "Do People Value Racial Diversity? Evidence from Nielsen Ratings," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1396-1396. [Downloadable!] (restricted)
  6. Guido De Blasio, 2005. "Production Or Consumption? Disentangling The Skill-Agglomeration Connection," ERSA conference papers ersa05p648, European Regional Science Association. [Downloadable!]
  7. Lisa M. George & Joel Waldfogel, 2006. "The New York Times and the Market for Local Newspapers," American Economic Review, American Economic Association, vol. 96(1), pages 435-447, March. [Downloadable!]
  8. Donald Haurin & Stuart Rosenthal, 2007. "Language, Agglomeration, and Hispanic Homeownership," Working Papers 07-04, Ohio State University, Department of Economics. [Downloadable!]
  9. Felix Oberholzer-Gee & Joel Waldfogel, 2006. "Media Markets and Localism: Does Local News en Español Boost Hispanic Voter Turnout?," NBER Working Papers 12317, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Heski Bar-Isaac & Guillermo Caruana & Vicente Cunat, 2006. "Diversity and demand externalities: How cheap information can reduce welfare," Working Papers 06-08, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  11. Simon Loertscher & Gerd Muehlheusser, 2008. "Dynamic Location Games," Department of Economics - Working Papers Series 1042, The University of Melbourne. [Downloadable!]
  12. Alberto Dalmazzo & Guido De Blasio, 2007. "Skill-Biased Agglomeration Effects and Amenities: Theory with an Application to Italian Cities," Department of Economics University of Siena 503, Department of Economics, University of Siena. [Downloadable!]
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