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The news hour: Welfare estimation in the market for local television news

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  • Baker, Matthew J.
  • George, Lisa M.

Abstract

We estimate the welfare consequences of local news broadcasting decisions in advertiser-funded television, a central question in media regulation. We model programming decisions as the outcome of a discrete game played by rival stations competing for advertising revenue (which depends on viewing) by choosing lineups of local news and entertainment broadcasts. Using program-level data on television viewing and advertising prices, we find modest under-provision of local news relative to the level that maximizes television viewing. Counterfactual simulations indicate an average deficit of 7.4 broadcasts per market, or 12.8% of local station broadcasts during the evening news hours. Most of this shortfall is in the 7:30 timeslot leading into prime time. We distinguish two sources of inefficiency: losses due to advertiser valuation of local news and entertainment viewers, and losses from classic business stealing. Losses from competition represent about one third of the estimated shortfall, suggesting gains to cooperation among competing stations.

Suggested Citation

  • Baker, Matthew J. & George, Lisa M., 2024. "The news hour: Welfare estimation in the market for local television news," International Journal of Industrial Organization, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:indorg:v:94:y:2024:i:c:s0167718724000237
    DOI: 10.1016/j.ijindorg.2024.103068
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    More about this item

    Keywords

    Two-sided markets; Advertising; Television; Business stealing;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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