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Exclusive vs Overlapping Viewers in Media Markets

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  • Ambrus, Attila
  • Reisinger, Markus
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    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.

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    File URL: http://epub.ub.uni-muenchen.de/13390/1/161.pdf
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    Bibliographic Info

    Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 161.

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    Date of creation: Aug 2006
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    Handle: RePEc:trf:wpaper:161

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    1. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA.
    2. 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.
    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.
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    Cited by:
    1. Anderson, Simon P & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," CEPR Discussion Papers 8923, C.E.P.R. Discussion Papers.
    2. Anna D'Annunzio & Antonio Russo, 2013. "Network Neutrality, Access to Content and Online Advertising," DIAG Technical Reports 2013-09, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    3. repec:ebl:ecbull:v:12:y:2007:i:7:p:1-8 is not listed on IDEAS
    4. Simon Loertscher & Gerd Muehlheusser, 2008. "Dynamic Location Games," Department of Economics - Working Papers Series 1042, The University of Melbourne.
    5. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2012. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," NBER Working Papers 18234, National Bureau of Economic Research, Inc.
    6. Alexander Rasch, 2007. "Platform competition with partial multihoming under differentiation: a note," Economics Bulletin, AccessEcon, vol. 12(7), pages 1-8.
    7. Matthew Gentzkow & Jesse M. Shapiro, 2014. "Ideology and Online News," NBER Chapters, in: Economics of Digitization National Bureau of Economic Research, Inc.
    8. Elena Panova, 2009. "Confirmatory News," Cahiers de recherche 0912, CIRPEE.

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