Every Viewer has a Price - On the Differentiation of TV Channels
AbstractThis study has three main objectives. First, we develop a realistic framework for studying the incentives to differentiate broadcasting in free-to-air TV markets. Consumers are allowed to vary the amount of time spent in front of the television set depending on preferences over program types (e.g., entertainment versus news), differences in the alternative cost of time and an Hotelling type dimension reflecting i.e., political positioning. Second, since empirical evidence suggest that different consumer segments are priced differently in the market for advertising, we analyze the implications of targeted advertising on the equilibrium level of differentiation. Third, we compare the equilibrium outcome with the socially optimal configuration. When consumers have no preferences over program types, standard Hotelling type results apply. Market forces minimize differentiation while the optimal degree is at an intermediate level. As preferences over program types get stronger the difference between optimal and market outcomes is initially reduced. However, when a large enough number of consumers start flipping between channels in order to avoid the least preferred program type, minimal differentiation suddenly becomes optimal while market forces leads to excessive differentiation. Hence, policies aimed at increasing diversity is beneficial only when viewers care little about program content.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:15.
Length: 39 pages
Date of creation: 03 Sep 2010
Date of revision:
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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Product Differentiation; TV Channels; Advertising;
Other versions of this item:
- Jonas H�ckner & Sten Nyberg, 2012. "Every Viewer has a Price: On the Differentiation of TV Channels," Journal of Media Economics, Taylor & Francis Journals, vol. 25(4), pages 220-243, December.
- L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-11 (All new papers)
- NEP-COM-2010-09-11 (Industrial Competition)
- NEP-CUL-2010-09-11 (Cultural Economics)
- NEP-MKT-2010-09-11 (Marketing)
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