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
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
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)
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)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:7391
Ordering information: This working paper can be ordered from
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.
Bibliographic data for series maintained by ().