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Exclusive vs Overlapping Viewers in Media Markets

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  • Ambrus, Attila
  • Reisinger, Markus

Abstract

This paper investigates competition for advertisers in media markets when viewers can subscribe to multiple channels. A central feature of the model is that channels are monopolists in selling advertising opportunities toward their exclusive viewers, but they can only obtain a competitive price for advertising opportunities to multi-homing viewers. Strategic incentives of firms in this setting are different than those in former models of media markets. If viewers can only watch one channel, then firms compete for marginal consumers by reducing the amount of advertising on their channels. In our model, channels have an incentive to increase levels of advertising, in order to reduce the overlap in viewership. We take an account of the differences between the predictions of the two types of models and find that our model is more consistent with recent developments in broadcasting markets. We also show that if channels can charge subscription fees on viewers, then symmetric firms can end up in an asymmetric equilibrium in which one collects all or most of its revenues from advertisers, while the other channel collects most of its revenues via viewer fees.

Suggested Citation

  • Ambrus, Attila & Reisinger, Markus, 2006. "Exclusive vs Overlapping Viewers in Media Markets," Discussion Papers in Economics 1178, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:1178
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    File URL: https://epub.ub.uni-muenchen.de/1178/1/MWWB_Ambrus_Reisinger.pdf
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    References listed on IDEAS

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    1. Peter O. Steiner, 1952. "Program Patterns and Preferences, and the Workability of Competition in Radio Broadcasting," The Quarterly Journal of Economics, Oxford University Press, vol. 66(2), pages 194-223.
    2. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 28, pages 1701-1844, Elsevier.
    3. Brown, Keith & Alexander, Peter J., 2005. "Market structure, viewer welfare, and advertising rates in local broadcast television markets," Economics Letters, Elsevier, vol. 86(3), pages 331-337, March.
    4. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    5. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
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    Citations

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    Cited by:

    1. Matthew Gentzkow & Jesse M. Shapiro, 2015. "Ideology and Online News," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 169-190, National Bureau of Economic Research, Inc.
    2. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," Discussion Papers 2012/9, Norwegian School of Economics, Department of Business and Management Science.
    3. Alexander Rasch, 2007. "Platform competition with partial multihoming under differentiation: a note," Economics Bulletin, AccessEcon, vol. 12(7), pages 1-8.
    4. Dirk Bergemann & Alessandro Bonatti, 2010. "Targeting in Advertising Markets: Implications for Offline vs. Online Media," Cowles Foundation Discussion Papers 1758, Cowles Foundation for Research in Economics, Yale University.
    5. D'Annunzio, Anna & Russo, Antonio, 2015. "Net Neutrality and internet fragmentation: The role of online advertising," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 30-47.
    6. Christopher Müller & Enrico Böhme, 2014. "The Monopoly Benchmark on Two-Sided Markets," Finnish Economic Papers, Finnish Economic Association, vol. 27(1), pages 56-69, Autumn.
    7. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    8. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2014. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," American Economic Review, American Economic Association, vol. 104(10), pages 3073-3114, October.
    9. Jonas Häckner & 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.
    10. Simon Loertscher & Gerd Muehlheusser, 2008. "Dynamic Location Games," Department of Economics - Working Papers Series 1042, The University of Melbourne.
    11. Simon P. Anderson & Martin Peitz, 2023. "Ad Clutter, Time Use, and Media Diversity," American Economic Journal: Microeconomics, American Economic Association, vol. 15(2), pages 227-270, May.
    12. George, Lisa M. & Hogendorn, Christiaan, 2012. "Aggregators, search and the economics of new media institutions," Information Economics and Policy, Elsevier, vol. 24(1), pages 40-51.
    13. Simon P. Anderson & Øystein Foros & Hans Jarle Kind, 2018. "Competition for Advertisers and for Viewers in Media Markets," Economic Journal, Royal Economic Society, vol. 128(608), pages 34-54, February.
    14. Antonio Russo & Anna D'Annunzio, 2013. "Network Neutrality, Access to Content and Online Advertising," KOF Working papers 13-344, KOF Swiss Economic Institute, ETH Zurich.
    15. repec:ebl:ecbull:v:12:y:2007:i:7:p:1-8 is not listed on IDEAS
    16. Elena Panova, 2009. "Confirmatory News," Cahiers de recherche 0912, CIRPEE.
    17. Gong Qiang & Pan Siqi & Yang Huanxing, 2019. "Targeted Advertising on Competing Platforms," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-20, January.

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    More about this item

    Keywords

    Media; Multihoming; Platform Competition; Two-Sided Markets;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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