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Advertising, Competition and Entry in Media Industries

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Author Info
Claude Crampes ()
Carole Haritchabalet ()
Bruno Jullien ()

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Abstract

This paper presents a model of media competition with free entry when media operators are financed both from advertisers and customers. The relation between advertising receipts and sales receipts, which are both complementary and antagonist, is different if media operators impose a price or a quantity to advertisers. When consumers dislike advertising, media operators are better off setting an advertising price than an advertising quantity. We establish a relationship between the equilibrium levels (advertising and entry) and the advertising technology. In particular, media operators’ profit is not affected by the introduction of advertising when they impose advertising quantities and when advertising exhibits constant returns to scale in the audience size. Under constant or increasing returns to scale in the audience size, we find an excessive level of entry and an insufficient level of advertising.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1591.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1591

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Related research
Keywords: media advertising free entry two-sided markets

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Tore Nilssen & Lars Sørgard, 2000. "TV Advertising, Program Quality, and Product-Market Oligopoly," Competition Policy Center, Working Paper Series CPC00-012, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  2. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May. [Downloadable!] (restricted)
  3. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May. [Downloadable!] (restricted)
  4. ROCHET, Jean-Charles & TIROLE, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  5. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
  7. 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:
  8. Tore Nilssen & Lars Sorgard, . "TV Advertising, Programming Investments, and Product-Market Oligopoly," University of California Santa Barbara - Department of Economics 6-00, California Santa Barbara - Department of Economics. [Downloadable!]
    Other versions:
  9. Esther Gal-Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 12(3), pages 291-325, 09. [Downloadable!] (restricted)
  10. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics. [Downloadable!]
  11. Gabszewicz, J.J. & Laussel, D. & Sonnac, N., 2000. "TV-Broadcasting Competition and Advertising," Papers 2000/6, Catholique de Louvain - Center for Operations Research and Economics.
  12. Peitz, Martin & Valletti, Tommaso, 2004. "Content and Advertising in the Media: Pay-TV versus Free-To-Air," CEPR Discussion Papers 4771, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Bruno Jullien, 2004. "Two-Sided Markets and Electronic Intermediaries," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  14. Häckner, Jonas & Nyberg, Sten, 2000. "Price Competition, Advertising and Media Market Concentration," Research Papers in Economics 2000:3, Stockholm University, Department of Economics. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tobias Wenzel, 2007. "Liberalization of Opening Hours with Free Entry," Ruhr Economic Papers 0013, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  2. Hans Jarle Kind & Marko Köthenbürger & Guttorm Schjelderup, 2005. "Do Consumers Buy Less of a Taxed Good?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. Kind, Hans Jarle & Schjelderup, Guttorm & Stähler, Frank, 2007. "Newspapers and Advertising: The Effects of Ad-Valorem Taxation under Duopoly," Discussion Papers 2007/5, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
    Other versions:
  4. 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 GmbH. [Downloadable!]
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