Advertising, Competition and Entry in Media Industries
AbstractThis 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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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1591.
Date of creation: 2005
Date of revision:
media; advertising; free entry; two-sided markets;
Other versions of this item:
- Crampes, Claude & Haritchabalet, Carole & Jullien, Bruno, 2006. "Advertising, Competition and Entry in Media Industries," IDEI Working Papers 374, Institut d'Économie Industrielle (IDEI), Toulouse.
- 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:
- NEP-ALL-2005-12-09 (All new papers)
- NEP-COM-2005-12-09 (Industrial Competition)
- NEP-CUL-2005-12-09 (Cultural Economics)
- NEP-MIC-2005-12-09 (Microeconomics)
- NEP-MKT-2005-12-09 (Marketing)
- NEP-TID-2005-12-09 (Technology & Industrial Dynamics)
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