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Public and Private Activity in Commercial TV Broadcasting

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  • Hansen, Bodil O.

    (Department of Economics, Copenhagen Business School)

  • Keiding, Hans

    (Department of Economics, Copenhagen Business School)

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    Abstract

    We consider a model of commercial television market, where private broadcasters coexist with a public television broadcaster. Assuming that the public TV station follows a policy of Ramsey pricing whereas the private stations are profit maximizers, we consider the equilibria in this market and compare with a situation where the public station is privatized and acts as another private TV broadcaster. A closer scrutiny of the market for commercial television leads to a distinction between target rating points, which are the prime unit of account in TV advertising, and net coverage, which is the final goal of advertisers. Working with net coverage as the fundamental concept, we exploit the models of competition between public and private price and quantity in order to show that privatization of the public TV station entails a welfare loss and results in TV advertising becoming more expensive.

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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7501
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    Bibliographic Info

    Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 02-2006.

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    Length: 23 pages
    Date of creation: 14 Sep 2006
    Date of revision:
    Handle: RePEc:hhs:cbsnow:2006_002

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    Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
    Phone: 38 15 25 75
    Fax: 38 15 34 99
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    Web page: http://www.cbs.dk/departments/econ/
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    Related research

    Keywords: TV broadcasting; imperfect competition; Ramsey pricing; welfare comparison;

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    1. Papandrea, Franco, 1997. "Modelling television programming choices," Information Economics and Policy, Elsevier, Elsevier, vol. 9(3), pages 203-218, September.
    2. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Financing of Media Firms: Does Competition Matter?," Memorandum, Oslo University, Department of Economics 01/2005, Oslo University, Department of Economics.
    3. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 91(1), pages 103-26, February.
    4. Mangani, Andrea, 2003. "Profit and audience maximization in broadcasting markets," Information Economics and Policy, Elsevier, Elsevier, vol. 15(3), pages 305-315, September.
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