Does Government-Restricted Entry Produce Market Power?: New Evidence from the Market for Television Advertising

Gary Fournier () and Donald L. Martin

Bell Journal of Economics, 1983, vol. 14, issue 1, 44-56

Abstract: This article examines the premise that television broadcasters are able to exercise substantial market power deriving from governmental restrictions on entry. Using a new sample of actual transactions prices, we estimate a hedonic equation identifying product quality components of advertising spots. The model demonstrates the significant effect on prices of uncertainty in audience delivery, on the basis of observed expectations of the buyer and seller. Previous empirical work on advertising markets neglected these transactional elements. Thus, once the relevant features of transactions are included in the analysis, prices appear to be unrelated to measures associated with market power.

Date: 1983
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