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Does Self-regulation of Advertisement Length Improve Consumer Welfare?

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  • Taisuke Matsubae
  • Noriaki Matsushima

Abstract

In Japan, TV platforms regulate themselves as to the length of the advertisements they air. Using modified Hotelling models, we investigate whether such self-regulation improves consumer and social welfare or not. When all consumers choose a single TV program (the utility functions of consumers satisfy the standard "full-coverage" condition), self-regulation always reduces consumer welfare. It improves social welfare only if the advertisement revenue of each platform is not small and the cost parameter of investments in improving the quality of TV programs is small. When some consumers have outside options (the standard "full-coverage" condition is not satisfied), self-regulation can benefit consumers because it increases the number of consumers who watch TV programs.

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0829.

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Date of creation: Jan 2012
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Handle: RePEc:dpr:wpaper:0829

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  1. 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.
  2. Francisco Martínez-Sánchez & Miguel González-Maestre, 2012. "Quality choice and advertising regulation in broadcasting markets," Working Papers. Serie AD 2012-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. Victor Ginsburgh & David Throsby, 2006. "Handbook of the economics of art and culture," ULB Institutional Repository 2013/1673, ULB -- Universite Libre de Bruxelles.
  4. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Programming and Advertising Competition in the Broadcasting Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 657-669, December.
  5. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2005. "Advertising, Competition and Entry in Media Industries," CESifo Working Paper Series 1591, CESifo Group Munich.
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