"Lost" on the Web: Does Web Distribution Stimulate or Depress Television Viewing?

In the past few years, YouTube and other sites for sharing video files over the Internet have vaulted from obscurity to places of centrality in the media landscape. The files available at YouTube include a mix of user-generated video and clips from network television shows. Networks fear that availability of their clips on YouTube will depress television viewing. But unauthorized clips are also free advertising for television shows. As YouTube has grown quickly, major networks have responded by making their content available at their own sites. This paper examines the effects of authorized and unauthorized web distribution on television viewing between 2005 and 2007 using a survey of Penn students on their tendencies to watch television series on television as well as on the web. The results provide a glimpse of the way young, Internet-connected people use YouTube and related sites. While I find some evidence of substitution of web viewing for conventional television viewing, time spent viewing programming on the web -- 4 hours per week -- far exceeds the reduction in weekly traditional television viewing of about 25 minutes. Overall time spent on network-controlled viewing (television plus network websites) increased by 1.5 hours per week.

The Median Voter and the Median Consumer: Local Private Goods and Residential Sorting

When a product's product provision entails fixed costs, it will be made available only if a sufficient number of people want it. Some products are produced and consumed locally, so that provision requires not only a large group favoring the product but a large number nearby. Just as one has an incentive to sort into community whose median voter shares his preferences for local public goods, product markets may provide an analogous incentive to sort into a community whose consumers tend to share his preferences in private goods. Using zip code level data on chain restaurants and restaurants overall, this paper documents how the mix of locally available restaurants responds to the local mix of consumers, with three findings. First, based on survey data on chain restaurant patronage, restaurant preferences differ substantially by race and education. Second, there is a strong relationship between restaurants and population at the zip code level, suggesting that restaurants%u2019 geographic markets are small. Finally, the mix of locally available chain restaurants is sensitive to the zipcode demographic mix by race and by education. Hence, differentiated product markets provide a benefit -- proximity to preferred restaurants -- to persons in geographic markets whose customers tend to share their preferences.

The Effect of Convicton on Income Through the Life Cycle

Existing studies of the impact of conviction on income and employment do not consider life cycle issues. We postulate that conviction reduces access to career jobs offering stable, long-term employment. Instead, conviction relegates offenders to spot market jobs, which may have higher pay at the outset of the career but do not offer stable employment or rapidly rising wages. Thus, first-time conviction may increase the wages of young workers while decreasing the wages of older workers. We test our theory with data on federal offenders and find that first-time conviction has a positive and significant effect on income for offenders under age 25 and an increasingly negative and significant impact for offenders over age 30. These results imply that the present value of income lost as a result of conviction varies over the life cycle, reaching a maximum in the middle of the career. We find that the gains sought by these offenders follow similar profiles, suggesting that prospective offenders are deterred by the possibility of lost future income. Because the discounted loss in future income facing young offenders may be small, our results may provide part of an explanation of youth crime.

Who Benefits Whom in Daily Newspaper Markets?

Markets are generally thought to avoid problems, such as tyranny of the majority, that arise when allocation is accomplished through collective processes. Yet, with fixed costs, differentiated product markets deliver only products desired by substantial constituencies. When consumers share similar preferences, then additional consumers will bring forth additional products or improve the attributes or position of existing products and the consumers confer positive pecuniary preference externalities' on each other. However, if distinct groups of consumers have substantially different preferences, the groups can hurt each other through product markets. We document the pattern of preference externalities among black and white consumers of daily newspapers in the US. We find that, in their capacity as newspaper consumers, members of each group benefits themselves and either harm, or fail to benefit, each other through the product market. We document that product positioning provides the mechanism underlying our results. While Friedman (1962) argues that the use of political channels tends to strain the social cohesion essential for a stable society,' while, by contrast, widespread use of the market reduces the strain on the social fabric by rendering conformity unnecessary,' mounting evidence on media markets suggests otherwise.

Product Quality and Market Size

Recent literature notes that when quality is produced with fixed costs, a high quality firm can undercut its rival's prices and may find it profitable to invest more in quality as market size grows large. As a result, a market can remain concentrated even as it grows large. When quality is produced with variable costs, by contrast, a wide range of product qualities can coexist in the market because they are offered at different prices. Larger markets will fragment and offer products with a wider range of qualities. Using US urban areas as markets, we examine the relationships between market size and product quality - and between market size and product concentration - for two industries that differ in their quality production process. We document that in the restaurants industry, where quality is produced largely with variable costs, the range of qualities on offer increases in market size, with each product maintaining a small market share. In daily newspapers, where quality is produced with fixed costs, the average quality of products increases with market size, and the market does not fragment as it grows large.

Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers

Investments in brand provide one method for vendors to become known and convince potential customers that vendors will deliver as promised. Alternatively, third-party information on retailers' existence, as well as whether they tend to keep their commitments can serve a similar function and may undermine investments in brand. This study uses a 13-month panel dataset on 1998-99 Internet shopping behavior and use of information intermediaries by over 30,000 households to examine whether information use undermines brand. We find that individuals who take up using price comparison sites reduce their shopping at a broad group of branded retailers by about a tenth. Users of pure price comparison sites, such as DealTime and mySimon, also reduce their Amazon by about a tenth, while individuals using BizRate, which provides both price comparison and vendor reliability information, reduce their Amazon shopping by a fifth. The results have possible implications for both firm strategy and the evolution of market structure. If information weakens the pull of brand, then Internet retailing may grow less concentrated over time.

Piracy on the Silver Screen

New information technology has reduced marginal production and distribution costs of information goods to negligible levels and promises to revolutionize many industries. Unpaid copies of digital products can be as good as paid first-generation copies, and their availability can undermine the ability of sellers to cover first-copy costs. As a result, unpaid distribution has emerged as a major issue facing the music and movie industries in the past few years. Using survey data on movie consumption by about 500 University of Pennsylvania college students, we ask whether unpaid consumption of movies displaces paid consumption. Employing a variety of cross-sectional and longitudinal empirical approaches, we find large and statistically significant evidence of displacement. In what we view as the most appropriate empirical specifications, we find that unpaid first consumption reduces paid consumption by about 1 unit. Unpaid second consumption has a smaller effect, about 0.20 units. These estimates indicate that unpaid consumption, which makes up 5.2 percent of movie viewing in our sample, reduced paid consumption in our sample by 3.5 percent.

Geography and the Internet: Is the Internet a Substitute or a Complement for Cities?

We study the tendency to connect to the Internet, and the online and offline shopping behavior of connected persons, to draw inferences about whether the Internet is a substitute or a complement for cities. We document that larger markets have more locally-targeted online content and that individuals are more likely to connect in markets with more local online content, suggesting the Internet is a complement to cities. Yet, holding local online content constant, people are less likely to connect in larger markets, indicating that the Internet is also a substitute for cities. We also find that individuals connect to overcome local isolation: notwithstanding a large digital divide, blacks are more likely to connect, relative to whites, when they comprise a smaller fraction of local population, making the Internet a substitute for agglomeration of preference minorities within cities. Finally, using online and offline spending data, we find that connected persons spend more on books and clothing online, relative to their offline spending, if they are farther from offline stores. This indicates that the Internet functions as a substitute for proximity to retail outlets.