Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets

Joel Waldfogel

RAND Journal of Economics, 2003, vol. 34, issue 3, 557-68

Abstract: Theory predicts that in markets with increasing returns, the number of differentiated products, and the tendency to consume, will grow in market size. I document this phenomenon across 247 U.S. radio markets. By a mechanism that I term "preference externalities," an increase in the size of the market brings forth additional products valued by others with similar tastes. But who benefits whom? I document sharp differences in preferences between black and white, and between Hispanic and non-Hispanic, radio listeners. As a result, preference externalities are large and positive within groups, and they are much smaller and nonmonotonic across groups. Copyright 2003 by the RAND Corporation.

Date: 2003
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Working Paper: Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated Product Markets (1999)
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