white listeners by its choice of (N
W
, N
B
). In their treatment, the fictitious planner is max-
imizing the welfare from listeners, given the cost of operating stations:
L¼WL
W
N
W
, N
B
ðÞ, L
B
N
W
, N
B
ðÞðÞ+ λ K F
W
N
W
F
B
N
B
½:
The planner’s welfare weights on black and white listening are @W =@L
W
and @W =@L
B
,
respectively. Each of the other terms in the equations may be calculated from the demand
model and as outputs from the entry model. Hence the welfare weights may be calculated
directly.
While this approach does not allow a direct determination of the optimal entry con-
figuration, it does allow a different sort of assessment. If the implied welfare weights on
listener types differs, then it is clear (subject to integer constrains) that a reallocation of sta-
tions from the group with the higher weight would raise welfare for an egalitarian planner.
Put more simply, it would generate more listening without raising station operating cost.
Some recent research on media has fruitfully employed dynamic models. See, for
example, the studies by
Sweeting (2013) and Jeziorski (2014) referenced above. Formal
treatment of these approaches lies outside the scope of this chapter, but we expect these
approaches to see wider application.
3.6. FUTURE CHALLENGES
Events tend to dictate both what questions are of interest and what questions can be stud-
ied. The development of the Internet has linked formerly distinct local media markets.
The substitutes for a local newspaper or radio station had traditionally been other local
outlets. Now, however, local products face competition from products elsewhere, with
the main consequence that local products are declining in most media markets. This has
been seen most acutely in newspapers, but local radio stations have also seen new com-
petition from both satellite and Internet radio. The rise of non-local products competing
with local products is of interest from a variety of perspectives.
One of the traditionally convenient features of media markets has been their geo-
graphic distinctness. The consumers in a particular geographic area motivate the entry
and positioning of local products. If there are 100 distinct markets, one has 100 indepen-
dent observations on both the entering products and consumer choices among their local
alternatives. With the growth of non-local products, entry and positioning decisions are
governed less by factors that differ across place.
Television consumption used to occur simultaneous with broadcast, making its mea-
surement and meaning relatively straightforward. The development of time-shifting
technologies (Tivo and later on-demand services) made its measurement somewhat more
complicated. More recently, the development of streaming television offerings (from
outlets such as Netflix and Hulu) has further complicated both the meaning and measure-
ment of television viewing.
118 Handbook of Media Economics
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