Market Provision of Public Goods : The Case of Broadcasting

This paper presents a theory of the market provision of broadcasting and uses it to address the nature of market failure in the industry. Advertising levels may be too low or too high, depending on the relative sizes of the nuisance cost to viewers and the expected benefits to advertisers from contacting viewers. Market provision may allocate too few or too many resources to programming and these resources may be used to produce programs of the wrong type. Monopoly may produce a higher level of social surplus than competition and the ability to price programming may reduce social surplus. JEL Classification: D43, L13, L82