Joel Waldfogel

Do Mergers Increase Product Variety? Evidence from Radio Broadcasting

Mergers can reduce costs and alter incentives about how to position products, so that theory alone cannot predict whether mergers will increase product variety. We document the effect of mergers on variety by exploiting the natural experiment provided by the 1996 Telecommunications Act. We find that consolidation reduced station entry and increased the number of formats available relative to the number of stations. We find some evidence that increased concentration increases variety absolutely. Based on the programming overlap of jointly owned stations, we can infer that the effects operate through product crowding that is consistent with spatial preemption.

Who affects whom in daily newspaper markets

When consumers share similar preferences, additional consumers will bring forth products that confer positive “preference externalities” on others. However, if distinct groups of consumers have substantially different preferences, the groups bring forth products with more appeal to themselves and less appeal to others. We document that in their capacity as daily newspaper consumers, blacks and whites are more likely to buy daily newspapers in markets with larger black and white populations, respectively. Similar results hold for Hispanics and non‐Hispanics, but not by education, income, or age. We provide evidence that product positioning underlies our results.

Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation

Both asymmetric information (AI) and divergent expectations (DE) theories offer possible explanations of the litigation puzzle. Under DE, cases proceed to trial when, by chance, the plaintiff is more optimistic than the defendant. As the fraction of cases tried (T) declines, this leads to a tendency toward 50 percent plaintiff win rates at trial (P), regardless of the fraction of plaintiff winners in the filed population. Under AI, by contrast, informed parties proceed to trial only when they expect to win. Hence, as the fraction of cases tried declines, plaintiff win rates at trial tends toward either 0 or 1. I present evidence that the relationship between T and P generated by the litigation process is consistent with DE and not AI. I also offer evidence of the presence of AI early in litigation in the form of one‐sided plaintiff win rates in cases adjudicated prior to trial. I reconcile these two findings with evidence that pretrial adjudication and settlement culls both likely plaintiff winners and likely plaintiff losers from the filed pool, causing a tendency toward central rather than extreme plaintiff win rates at trial.

The New York Times and the Market for Local Newspapers

Recent technological advances have dramatically lowered the cost of transmitting information over large distances. In the late 1990s, the New York Times implemented a national distribution strategy, expanding delivery in over 100 cities. Using cross-sectional and longitudinal data on local newspaper circulation, Times penetration, and local newspapers characteristics, we find that as Times circulation grows in a market, local newspaper circulation declines among college-educated readers. Local newspapers reposition toward local and away from national coverage, raising circulation among individuals without a degree. Availability of national newspapers in local markets changes the relationship between local preferences and local products.

Piracy on the Silver Screen

New information technology has reduced marginal production and distribution costs of information goods to negligible levels and promises to revolutionize many industries. Unpaid copies of digital products can be as good as paid first-generation copies, and their availability can undermine the ability of sellers to cover first-copy costs. As a result, unpaid distribution has emerged as a major issue facing the music and movie industries in the past few years. Using survey data on movie consumption by about 500 University of Pennsylvania college students, we ask whether unpaid consumption of movies displaces paid consumption. Employing a variety of cross-sectional and longitudinal empirical approaches, we find large and statistically significant evidence of displacement. In what we view as the most appropriate empirical specifications, we find that unpaid first consumption reduces paid consumption by about 1 unit. Unpaid second consumption has a smaller effect, about 0.20 units. These estimates indicate that unpaid consumption, which makes up 5.2 percent of movie viewing in our sample, reduced paid consumption in our sample by 3.5 percent.

Music File Sharing and Sales Displacement in the iTunes Era

A growing empirical literature examines the relationship between music file sharing and legal purchases of music, but existing studies examine the period before consumers had attractive legal digital a la carte options. The iTunes Music Store has grown quickly since its appearance in 2003, and digital music now accounts for a third of US recorded music sales. Using two new surveys of University of Pennsylvania undergraduates in 2009 and 2010, we ask how music file sharing and sales displacement operate in the iTunes era, when the alternative to file sharing is purchasing individual songs, rather than entire albums. We find large amounts of file sharing in this population. Respondents have more stolen than paid music, but the music obtained via file sharing is, for the most part, low-valuation music which the respondents would likely not have purchased. The rate of sales displacement implied by the relationship between stolen and purchased music across respondents in both samples is between -0.15 and -0.3. That is, an additional song stolen reduces paid consumption by between a third and a sixth of song. Perhaps surprisingly, this is about the same as the CD sales displacement rate found for the pre-iTunes era using a similar empirical approach on a similar study population.

The Effect of Conviction on Income Through the Life Cycle

Existing studies of the impact of conviction on income and employment do not consider life cycle issues. We postulate that conviction reduces access to career jobs offering stable, long-term employment. Instead, conviction relegates offenders to spot market jobs, which may have higher pay at the outset of the career but do not offer stable employment or rapidly rising wages. Thus, first-time conviction may increase the wages of young workers while decreasing the wages of older workers. We test our theory with data on federal offenders and find that first-time conviction has a positive and significant effect on income for offenders under age 25 and an increasingly negative and significant impact for offenders over age 30. These results imply that the present value of income lost as a result of conviction varies over the life cycle, reaching a maximum in the middle of the career. We find that the gains sought by these offenders follow similar profiles, suggesting that prospective offenders are deterred by the possibility of lost future income. Because the discounted loss in future income facing young offenders may be small, our results may provide part of an explanation of youth crime.

Market reform in New Jersey and the effect on mortality from acute myocardial infarction.

OBJECTIVE To determine whether mortality rates for patients with acute myocardial infarction (AMI) changed in New Jersey after implementation of the Health Care Reform Act, which reduced subsidies for hospital care for the uninsured and changed hospital payment to price competition from a rate-setting system based on hospital cost. DATA SOURCES/STUDY SETTING Patient discharge data from hospitals in New Jersey and New York from 1990 through 1996 and the Healthcare Cost and Utilization Project (HCUP) Nationwide Inpatient Sample (NIS). STUDY DESIGN A comparison between states over time of unadjusted and risk-adjusted mortality and cardiac procedure rates. DATA COLLECTION Discharge data were obtained for 286,640 patients with the primary diagnosis of AMI admitted to hospitals in New Jersey or New York from 1990 through 1996. Records of 364,273 NIS patients were used to corroborate time trends. PRINCIPAL FINDINGS There were no significant differences in AMI mortality among insured patients in New Jersey relative to New York or the NIS. However, there was a relative increase in mortality of 41 to 57 percent among uninsured New Jersey patients post-reform, and their rates of expensive cardiac procedures decreased concomitantly. CONCLUSIONS The introduction of hospital price competition and reductions in subsidies for hospital care of the uninsured were associated with an increased mortality rate among uninsured New Jersey AMI patients. A relative decrease in the use of cardiac procedures in New Jersey may partly explain this finding. Additional studies should be done to identify whether other market reforms have been associated with changes in the quality of care.

Public radio in the United States: does it correct market failure or cannibalize commercial stations?

Radio signals are pure public goods whose total value to society is the sum of their value to advertisers and listeners. Because broadcasters can capture only part of the value of their product as revenue, there is the potential for a classic problem of underprovision. Small markets have much less commercial program variety than larger markets, suggesting a possible underprovision problem. Public funding of radio broadcasting targets programming in three formats - news, classical music, and jazz - with at least some commercial competition. Whether public support corrects a market failure depends on whether the market would have provided similar services in the absence of public broadcasting. To examine this we ask whether public and commercial classical stations compete for listening share and revenue. We then directly examine whether public stations crowd out commercial stations. We find evidence consistent with the view that public broadcasting crowds out commercial programming in large markets, particularly in classical music and to a lesser extent in jazz. Although the majority of government subsidies to radio broadcasting are allocated to stations without commercial competition in their format (thereby possibly correcting inefficient market underprovision), roughly a quarter of subsidies support direct competition with existing commercial stations.

Strength in Numbers: Group Size and Political Mobilization*

An important result in interest group theory and political economy is that small groups are more influential than their size would lead us to expect. In this study, we document that the opposite holds for political mobilization. Citizens are more likely to participate in elections if they belong to large groups. We present evidence that both the absolute size of groups and their population share influence individual participation decisions. The link between group size and political mobilization is in part due to the structure of media markets. Candidates find it easier to direct campaign messages at larger groups because many existing media outlets cater to them.