Dynamic Product Repositioning in Differentiated Product Markets: The Case of Format Switching in the Commercial Radio Industry
NBER Working Paper No. 13522
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.
Published: The Effects of Horizontal Mergers on Product Positioning: Evidence from the Music Radio Industry, RAND Journal of Economics , 41(2), 372 - 397, Summer 2010