Nber Working Paper Series Dynamic Product Repositioning in Differentiated Product Markets: the Case of Format Switching in the Commercial Radio Industry

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. Andrew Sweeting Department of Economics 213 Social Sciences Box 90097 Duke University Durham NC 27708 and NBER [email protected]