Working Paper: NBER ID: w13522
Authors: Andrew Sweeting
Abstract: The ability of firms to reposition their products can determine the effects of demand shocks, mergers and policy interventions in differentiated product markets. This paper estimates a dynamic oligopoly model to measure repositioning costs in the commercial radio industry. Based on a set of markets where industry revenues were around $88 billion, I find that stations may have spent as much as $6 billion on repositioning. However, repositioning costs are not large enough to prevent radio markets adapting quite quickly to demand shocks.
Keywords: product repositioning; differentiated products; dynamic oligopoly; commercial radio; format switching
JEL Codes: L11; L13; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Repositioning costs (L11) | Revenue effect (H23) |
| Repositioning costs (L11) | Rapid market adaptation to demand shocks (D43) |
| Format switching (Y10) | Listener gain (Y20) |
| Repositioning (J62) | Hispanic listening increase (N96) |
| Format switching (Y10) | Black listening increase (Y50) |