Gernot Sieg, Torben Stühmeier
»Fixing What Ain't Broke« through Public Service Broadcasting
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This survey discusses the merits of public intervention in broadcasting markets. By means of a theoretical model, we derive cases of market imperfection in a two-sided market setup and survey the literature. We show that there is often no clear free-market bias in (for example) advertising levels, program quality, or channel diversity with respect to a socially optimal equilibrium. The economic literature paints a diverse picture of public provision of broadcasting. While public service broadcasting can indeed remedy some market failures, it may also exacerbate others. Thus, there is no simple rationale for public intervention in broadcasting markets based on the traditional theory of market failure.