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Paying to remove advertisements

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  • Tåg, Joacim

Abstract

Media firms sometimes allow consumers to pay to remove advertisements from an ad-based product. We formally examine an ad-based monopolist's incentives to introduce this option. When deciding whether or not to introduce the option to pay, the monopolist compares the potential direct revenues from consumers who pay, with the lost advertising revenues resulting from the subsequent ad removal. If the pay alternative is introduced, the media firm increases advertising quantity to make the option to pay more attractive. This outcome hurts consumers but benefits the media firm and the advertisers. Total welfare may increase or decrease. Perhaps surprisingly, more annoying advertisements may lead to an increase in advertising quantity.

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Bibliographic Info

Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 21 (2009)
Issue (Month): 4 (November)
Pages: 245-252

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Handle: RePEc:eee:iepoli:v:21:y:2009:i:4:p:245-252

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Web page: http://www.elsevier.com/locate/inca/505549

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Keywords: Advertising Damaged goods Media markets Price discrimination Two-sided markets Vertical differentiation;

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References

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Cited by:
  1. Helmut Dietl & Markus Lang & Panlang Lin, 2012. "Advertising Pricing Models in Media Markets: Lump-Sum versus Per-Consumer Charges," Working Papers 0157, University of Zurich, Institute for Strategy and Business Economics (ISU).
  2. Simon P. Anderson & Joshua S. Gans, 2011. "Platform Siphoning: Ad-Avoidance and Media Content," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 1-34, November.

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