Should Utility-Reducing Media Advertising be Taxed?
AbstractEmpirical evidence suggests that people dislike ads in media products like TV programs. In such situations standard economic theory prescribes that the advertising volume can be optimally reduced by levying a tax on ads. However, making use of recent advances in the theory of Industrial Organization and two-sided markets we show that taxing ads may be counterproductive. In particular, we identify a number of situations in which ad-adverse consumers are negatively affected by the tax, and we even show that the tax may lead to higher ad volumes. This unorthodox reaction to a tax may arise when consumers significantly dislike ads, i.e. in situations where traditional arguments for corrective taxes are strongest.
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 InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2589.
Date of creation: 2009
Date of revision:
two-sided markets; media market; pricing strategy; ad-tax;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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.:
- Mark Armstrong Author-Email: email@example.com Author-Workplace-Name: University College of London, 2006.
"Competition in Two-Sided Markets,"
RAND Journal of Economics,
The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
- Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA.
- Armstrong, M., 2006. "Competition in two-sided markets," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Hans Jarle Kind & Tore Nilssen & Lars S�rgard, 2007.
"Competition for Viewers and Advertisers in a TV Oligopoly,"
Journal of Media Economics,
Taylor and Francis Journals, vol. 20(3), pages 211-233.
- Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2006. "Competition for Viewers and Advertisers in a TV Oligopoly," CESifo Working Paper Series 1862, CESifo Group Munich.
- Simon P., ANDERSON & Jean J., GABSZEWICZ, 2005.
"The media and advertising : a table of two-sided markets,"
Discussion Papers (ECON - DÃ©partement des Sciences Economiques)
2005060, Université catholique de Louvain, Département des Sciences Economiques.
- Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, Elsevier.
- Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers.
- ANDERSON, Simon P. & GABSZEWICZ, Jean J., 2005. "The media and advertising : a tale of two-sided markets," CORE Discussion Papers 2005088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- ANDERSON, Simon P. & GABSZEWICZ, Jean J., . "The media and advertising: a tale of two-sidedmarkets," CORE Discussion Papers RP -1888, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Gilbert E. Metcalf, 2006.
Discussion Papers Series, Department of Economics, Tufts University
0607, Department of Economics, Tufts University.
- Don Fullerton & Gilbert E. Metcalf, 2001. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0106, Department of Economics, Tufts University.
- Don Fullerton & Gilbert E. Metcalf, 2002. "Tax Incidence," NBER Working Papers 8829, National Bureau of Economic Research, Inc.
- Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
- GABSZEWICZ, Jean & LAUSSEL, Didier & SONNAC, Nathalie, 2002. "Attitudes toward advertising and price competition in the press industry," CORE Discussion Papers 2002026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2007.
"Taxation in Two-Sided Markets,"
2007/3, Department of Business and Management Science, Norwegian School of Economics.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, November.
- Evans David S., 2003. "Some Empirical Aspects of Multi-sided Platform Industries," Review of Network Economics, De Gruyter, vol. 2(3), pages 1-19, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.