Scale economies and scope economies in the Japanese broadcasting market

The purpose of this study is to calculate scale economies of television and radio services and scope economies between the two services, and then consider the cost structure of the Japanese terrestrial broadcasting industry. The symmetric generalized McFadden cost function is estimated using data collected on 20 local broadcasters from 1997 to 2002. The stand-alone cost and incremental cost are measured, as well as economies of scale and scope, using the estimated parameters. The results show that broadcasters which provide both television and radio services save 12% of cost at the sample mean, as compared to providing each service separately.