Paying to remove advertisements
AbstractMedia 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 InfoArticle provided by Elsevier in its journal Information Economics and Policy.
Volume (Year): 21 (2009)
Issue (Month): 4 (November)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505549
Advertising Damaged goods Media markets Price discrimination Two-sided markets Vertical differentiation;
Other versions of this item:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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