Handbook of Media Economics, vol 1A

These results come from an “inverted pyramid” structure of preferences. On each level

are genres, these getting finer from the bottom (the LCD) to the top (where each taste

type is represented). The idea is that most people will tune in if their most preferred

option is available, fewer if a broader-based option is all that is available. For illustration,

suppose that 80% of the population will listen to the lowest-level (LCD) program. If two

middle-level programs are available, 45% of the population will listen to each. At the top

level, all listen and the split is equal. So, let us trace how the market develops as we

decrease fixed costs (equivalently, as we increase the number of consumers across the

board). This is the market size effect. With ...