Working Paper No. 12-03

Market Structure and Media Diversity
Scott J. Savage, Donald M. Waldman, Scott Hiller
October 2012

ABSTRACT

We estimate demand for local news service described by the offerings from newspapers, radio, television, the Internet, and Smartphone. Results show that the representative consumer values diversity in the reporting of news, more coverage of multicultural issues, and more information on community news. About two-thirds of consumers have a distaste for advertising, which likely reflects their consumption of general, all-purpose advertising delivered by traditional media. Demand estimates are used to calculate the impact on consumer welfare from a marginal decrease in the number of independent television stations that lowers the amount of diversity, multiculturalism, community news and advertising in the market. Welfare decreases, but the losses are smaller in large markets. For example, small-market consumers lose $53 million annually while large-market consumers lose $15 million. If the change in market structure occurs in all markets, total losses nationwide would be about $830 million.

JEL classification: C9, C25, L13, L82, L96
Keywords: market structure, media diversity, mixed logit, news, welfare

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