In theory, free entry can lead to social inefficiency. We study the radio industry in a first attempt to quantify this inefficiency. Using cross-sectional data on advertising prices, the number of stations, and radio listening, we estimate the parameters of listeners' decisions and of firms'...

This article considers the problem of "supply-and-demand" analysis on a cross section of oligopoly markets with differentiated products. The primary methodology is to assume that demand can be described by a discrete-choice model and that prices are endogenously determined by price-setting...

Theory predicts that in markets with increasing returns, the number of differentiated products, and the tendency to consume, will grow in market size. I document this phenomenon across 247 U.S. radio markets. By a mechanism that I term "preference externalities," an increase in the size of the...