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Minimum Differentiation in Commercial Media Markets

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Author Info
Esther Gal-Or
Anthony Dukes

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Abstract

We examine a model of locational choice in commercial media markets. Commercial media (stations) compete for audiences with their choice of programming variety in order to attract advertising revenues from advertisers. These advertisers (producers) compete in a differentiated product market and rely on advertising to inform consumers about their product. We use the model to show that media have incentives to minimize the extent of differentiation between them. This incentive is an implication of the assumed role of advertising as information and as an ultimate nuisance to the audience. When stations minimally differentiate their programming offerings, producers choose lower levels of advertising. Consequently, lower levels of product information are available to consumers, permitting producers to gain higher margins on product sales. As a result, stations can negotiate higher payments for advertising space. Copyright (c) 2003 Massachusetts Institute of Technology.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 12 (2003)
Issue (Month): 3 (09)
Pages: 291-325
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Handle: RePEc:bla:jemstr:v:12:y:2003:i:3:p:291-325

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  1. Crampes, Claude & Haritchabalet, Carole & Jullien, Bruno, 2006. "Advertising, Competition and Entry in Media Industries," IDEI Working Papers 374, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  2. Jean J. , GABSZEWICZ & Didier, LAUSSEL & Nathalie, SONNAC, 2006. "Advertising and the rise of the free daily newspapers," Discussion Papers (ECON - Département des Sciences Economiques) 2006045, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
    Other versions:
  3. Andrea Galeotti & José Luis Moraga-González, 2008. "Platform Intermediation in a Market for Differentiated Products," Tinbergen Institute Discussion Papers 08-020/1, Tinbergen Institute. [Downloadable!]
    Other versions:
  4. Baron, David P., 2003. "Competing for the Public through the News Media," Research Papers 1808, Stanford University, Graduate School of Business. [Downloadable!]
  5. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers in Economics 963, University of Munich, Department of Economics. [Downloadable!]
  6. Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September. [Downloadable!]
  8. Nagler, Matthew, 2006. "Understanding the Internet's relevance to media ownership policy: a model of too many choices," MPRA Paper 2180, University Library of Munich, Germany. [Downloadable!]
  9. Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum 18/2001, Oslo University, Department of Economics. [Downloadable!]
  10. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Advertising on TV: Under- or Overprovision?," Memorandum 15/2005, Oslo University, Department of Economics. [Downloadable!]
  11. Anthony J. Dukes, 2005. "Media Concentration and Consumer Product Prices," CIE Discussion Papers 2005-06, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
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  12. Martin Richardson, 2004. "Cultural quotas in broadcasting II: policy," ANUCBE School of Economics Working Papers 2004-443, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
  13. Alexei Alexandrov, 2006. "Fat Products," Discussion Papers 1435, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  14. Hoernig, Steffen & Valletti, Tommaso, 2006. "Mixing Media with Two-Part Tariffs," CEPR Discussion Papers 5437, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  15. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2006. "Competition for Viewers and Advertisers in a TV Oligopoly," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  16. Simon P. Anderson & Stephen Coate, 2003. "Market Provision of Broadcasting: A Welfare Analysis," Virginia Economics Online Papers 358, University of Virginia, Department of Economics. [Downloadable!]
    Other versions:
  17. Susanne Kremhelmer & Hans Zenger, 2004. "Advertising and the Media," Industrial Organization 0403003, EconWPA. [Downloadable!]
  18. Richard Schmidtke, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers 133, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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