Dynamic Product Repositioning in Differentiated Product Markets: The Case of Format Switching in the Commercial Radio Industry
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NBER Working Paper No. 13522
Issued in October 2007
NBER Program(s): IO
The ability of firms to reposition their products can determine the effects of demand shocks, mergers and policy interventions in differentiated product markets. This paper estimates a dynamic oligopoly model to measure repositioning costs in the commercial radio industry. Based on a set of markets where industry revenues were around $88 billion, I find that stations may have spent as much as $6 billion on repositioning. However, repositioning costs are not large enough to prevent radio markets adapting quite quickly to demand shocks.
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