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Price Discrimination and Audience Composition in Advertising-Based Broadcasting

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  • Roberto Roson

    ()
    (Department of Economics, University Of Venice Cà Foscari)

Abstract

Traditionally, media like TV and radio, but also the Internet, have been characterized by free access (by consumers having the necessary hardware), with services supported through advertising revenues. Profitability in these markets depends on the capability of attracting audience. Strategic choices, however, also depend on the relationship with the dual market for advertising services. In this paper, a model is introduced, which has two distinguishing features. First, the multidimensional nature of competition in media markets is acknowledged, through explicit modeling of vertical and horizontal differentiation. Second, the price of advertising depends on the expected audience composition, not simply on its magnitude. It also depends on the broadcasters' capability of effectively price-discriminate among advertising customers. It is found that market equilibria depend on a number of critical factors: the amount and type of price discrimination in advertising, the correlation between formats and audience composition, the relative profitability of the different market segments, and diseconomies of scale in program quality.

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File URL: http://www.unive.it/media/allegato/DIP/Economia/Working_papers/Working_papers_2007/WP_DSE_roson_07_07.pdf
File Function: First version, May 2007
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Bibliographic Info

Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2007_07.

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Length: 23 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:ven:wpaper:2007_07

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Related research

Keywords: Advertising; Media Industries; Broadcasting; Price Discrimination; Television; Radio; Differentiation.;

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References

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  1. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
  2. Papandrea, Franco, 1997. "Modelling television programming choices," Information Economics and Policy, Elsevier, vol. 9(3), pages 203-218, September.
  3. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
  4. Roson Roberto, 2005. "Two-Sided Markets: A Tentative Survey," Review of Network Economics, De Gruyter, vol. 4(2), pages 1-19, June.
  5. Beebe, Jack H, 1977. "Institutional Structure and Program Choices in Television Markets," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 15-37, February.
  6. Bourreau, Marc, 2003. "Mimicking vs. counter-programming strategies for television programs," Information Economics and Policy, Elsevier, vol. 15(1), pages 35-54, March.
  7. Anthony Dukes, 2004. "The Adverstising Market in a Product Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 52(3), pages 327-348, 09.
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Cited by:
  1. Anna D'Annunzio, 2013. "Vertical Integration in Two-Sided Markets: Exclusive Provision and Program Quality," DIAG Technical Reports 2013-16, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".

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