Creating a public good to fight monopolization: The formation of Broadcast Music, Inc

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Abstract

Entry by vertical integration to defeat monopolization has played an important role in several antitrust cases. Yet the source of financing for such entry is unclear, given that the entrant represents a public good to the vertically related firms. While there are a number of theoretical and experimental studies on the private supply of a public good, there is little empirical estimation on this topic. This paper examis business contributions to the creation of Broadcast Music, Inc. (BMI) in 1940. BMI was created by broadcasters specifically to fight monopolization, and represented investment in a pure public good. This study finds that several factors led to contributions to create BMI. In particular, network affiliation increased the probability that a station would join BMI. There is also evidence stations in less competitive markets were more likely to join, indicating that the rents from the creation of BMI were less likely to be competed away in such markets.

Original languageEnglish (US)
Pages (from-to)243-256
Number of pages14
JournalReview of Industrial Organization
Volume19
Issue number2
DOIs
StatePublished - 2001

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

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