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  5. Ownership Concentration and Strategic Supply Reduction

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Ownership Concentration and Strategic Supply Reduction

  • Ulrich Doraszelski
  • Katja Seim
  • Michael Sinkinson
  • Peichun Wang
American Economic Review (Forthcoming)

Abstract

We explore the implications of ownership concentration for the recently concluded incentive auction that re-purposed spectrum from broadcast TV to mobile broadband usage in the U.S. We document significant multi-license ownership of TV stations. We show that in the reverse auction, in which TV stations bid to relinquish their licenses, multi-license owners have an incentive to withhold some TV stations to drive up prices for their remaining TV stations. Using a large-scale valuation and simulation exercise, we find that this strategic supply reduction increases payouts to TV stations by between 13.5% and 42.4%.

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