This paper discusses the connection between rate regulation and bargaining outcomes. The authors, Jane Murdoch, Frank Mathewson, and Gerry Wall, consider the case of licensing musical works for radio broadcasting. Our model illustrates the impact when music broadcasters can switch to a talk format. Using a generalized Nash bargaining setting, we interpret the revenue sharing rules established within the regulatory regimes in the US and Canada. In any negotiations over a sharing rule with the collectives that own the musical works rights, the ability of broadcasters to switch from a music to a talk format constitutes the threat point for the broadcasters. Using US and Canadian data for 2014 and 2015, we derive the bargaining weights that would generate the same revenue flows for broadcasters and collectives as those produced under the shadow of a copyright regulatory regime. These numerical examples show a higher weight to collectives than appears from the stated tariff rates.
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Assessing umbrella pricing incentives
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