Negotiations and Exclusivity Contracts for Advertising
AbstractExclusive advertising on a given media outlet is usually profitable for an advertiser because consumers are less aware of competing products. However, for such arrangements to exist, media must benefit as well. We examine conditions under which such exclusive advertising contracts benefit both advertisers and media outlets (referred to as ) by illustrating that exclusive equilibria arise in a theoretical model of the media, advertisers, and consumers who participate in both the product and media markets. In the model, stations sell advertising space to advertisers and broadcast advertising messages to consumers. Conditions leading to higher equilibrium levels of advertising can be unprofitable for advertisers because high levels of advertising make consumers better informed and thus lead to fiercer product price competition. As a result, media stations may be less profitable as well because their payoff is determined as a fraction of the advertiser surplus generated in the product market. Stations mitigate this effect by offering advertisers exclusive advertising contracts. With such contracts, consumers are less informed about competing products, yielding higher producer surplus. It is profitable for stations to offer exclusivity when commercial advertising is an important means for advertisers to inform consumers about their products.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Marketing Science.
Volume (Year): 22 (2003)
Issue (Month): 2 (November)
Advertising; Market Structure; Media;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.