1. Broadcasting Competition and Programming Costs David Genesove Hebrew University of Jerusalem and CEPR Comments by Lisa George Department of Economics Hunter College and the Graduate School, CUNY

2. 2 Overview Competing Effects of Competition on Program Quality More Firms → More Competition for Listeners → Incentives to Attract Listeners → Higher Quality Programs (Direct Effect) Fewer Firms → Higher Ad Revenue per Listener → Incentives to Attract Listeners → Higher Quality Programs (Indirect Effect) Dominant Effect Depends on Disutility of Distance / Disutility of Ads Theoretical Contribution Extension of Salop’s Circular City Extend Choi (2006), Armstrong & Weeds (2006) to Non-Linear Transport Cost Result: When Transport Cost a Super-Unitary Power of Distance (targeting extra- important), Quality Increases with N and Dominates Ad Effect Empirical Framework Goal: Estimate Effect of Concentration on Quality (Overall & Conditional on Ad Revenue) Setting: Expansion of AM Radio in 1940’s Data Quality = Programming Cost Station Advertising Revenue Concentration = Number of Stations Estimation Strategy Instruments: Concurrent & Lagged Economic Growth FCC Freeze – Concentration Differenced Out Wartime Entry – Exogenous

3. 3 Results Effect of Concentration on Quality (Overall and Conditional) OLS – Both Zero IV – Overall effect large but statistically insignificant IV-- Conditional effect is zero. Effect of Concentration on Ad Revenue OLS – Zero IV Positive but weakly significant Results suggest convex distance function (decreasing marginal disutility of distance) Programming expenditures sensitive to market size

4. 4 Comments Useful, Practical Model Paper Structure Market for Talent -- Theoretical and Empirical Aside Free Entry Equilibrium – Theoretical Aside Empirical Road Map Graphs of stations, revenue, programming? Describe what is estimated & why (estimation variables vs. structural variables) Separate OLS & IV? Need to consider estimation challenges & biases along with data (Section 3 & 4) Interpret coefficients alone and in terms of structural equation Other Estimation Issues Relationship between program expenditure & quality over time? Restricted 1944 sample? Network Shows – All Stations? Multi-station firms? Multiplication Factor – 2.5