Paying to Remove Advertisements
AbstractMedia firms sometimes allow consumers to pay to remove advertisements from an advertisement-based product. We formally examine an ad-based monopolist's incentives to introduce this option. When deciding whether to introduce the option to pay, the monopolist compares the potential direct revenues from consumers with lost advertising revenues from not intermediating those consumers to advertisers. If the option is introduced, the media firm increases advertising quantity to make the option to pay more attractive. This hurts consumers, but benefits the media firm and advertisers. Total welfare may increase or decrease. Perhaps surprisingly, more annoying advertisements may lead to an increase in advertising quantity.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 789.
Length: 15 pages
Date of creation: 13 Feb 2009
Date of revision:
Publication status: Published in Information Economics and Policy, 2009, pages 245-252.
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Advertising; Damaged goods; Media markets; Price discrimination; Two-sided markets; Vertical differentiation;
Other versions of this item:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-10 (All new papers)
- NEP-MIC-2009-06-10 (Microeconomics)
- NEP-MKT-2009-06-10 (Marketing)
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