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How effective are advertising bans? On the demand for quality in two-sided media markets

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  • Greiner, Tanja
  • Sahm, Marco

Abstract

We study a two-sided markets model of two competing television broadcasters that offer content of differentiated quality to ad-averse consumers and advertising space to firms. As all consumers prefer high over low quality content, competition for viewers is vertical. By contrast, competition for advertisers is horizontal, taking into account the firms’ targeted advertising motive. Analyzing the impact of an advertising ban on the high quality medium, we derive the following results: (i) total advertising volumes decrease; (ii) the viewer market share of the high-quality broadcaster and thus the equilibrium reception of high quality content decreases; (iii) welfare decreases; (iv) the low-quality broadcaster’s profits will increase if and only if ad nuisance is small compared to ad effectiveness.

Suggested Citation

  • Greiner, Tanja & Sahm, Marco, 2018. "How effective are advertising bans? On the demand for quality in two-sided media markets," Information Economics and Policy, Elsevier, vol. 43(C), pages 48-60.
    • Handle: RePEc:eee:iepoli:v:43:y:2018:i:c:p:48-60
    DOI: 10.1016/j.infoecopol.2018.01.003
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    More about this item

    Keywords

    Two-sided market; Advertising ban; Platform competition; Indirect network effects; Horizontal and vertical product differentiation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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