EconPapers    
Economics at your fingertips  
 

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

Joel Waldfogel ()

No 7391, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Theory predicts that in markets with increasing returns, the number of differentiated products and resulting consumer satisfaction grow in market size. We document this phenomenon across 246 US radio markets. By a mechanism that we 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? We examine the patterns of and mechanisms for preference externalities between black and white and between Hispanic and non-Hispanic radio listeners, and among listeners of different age groups. The patterns are striking: while preference externalities are large and positive within groups, they are small and possibly negative across groups. For example, while black-targeted station entry and the black listening share increase in black population, they are unaffected (or possibly reduced) by the size of the white population. Consequently, small groups receive less variety from the market. Forces that increase the size of the market, such as emerging satellite and Internet technologies, may increase the satisfaction of individuals whose preferences do not match their fellow local residents'.

JEL-codes: L13 L82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind
Date: 1999-10
Note: IO LE
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed

Published as Waldfogel, Joel. "Preference Externalities: An Empirical Study Of Who Benefits Whom In Differentiated-Product Markets," Rand Journal of Economics, 2003, v34(3,Autumn), 557-568.

Downloads: (external link)
http://www.nber.org/papers/w7391.pdf (application/pdf)

Related works:
Journal Article: Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:7391

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7391

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Series data maintained by ().

 
Page updated 2017-10-07
Handle: RePEc:nbr:nberwo:7391