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TV Advertising, Program Quality, and Product-Market Oligopoly

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  • Tore Nilssen

    (Department of Economics, University of Oslo)

  • Lars Sørgard

    (Department of Economics, Norwegian School of Economics & Business Administration, Bergen, Norway)

Abstract

We present a model of the TV-advertising market that encompasses both the product markets and the market for TV programs. We argue that the TV industry has several idiosyncratic characteristics that need to be modeled, and show that the strategic interaction in this industry differs from other industries in many respects. We find that a move from a TV monopoly to a TV duopoly may reduce both the total number of viewers and the total amount of TV advertising. A softening of price competition in each product market results in more investment in program quality, higher price per advertising slot, and more advertising. A reduction of the number of firms in each product market may have the opposite effect if the price competition in the product market is sufficiently soft initially. Finally, we find that even small asymmetries between product markets can cause large asymmetries with respect to which producers buy advertising on TV.

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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0303012.

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Length: 2 pages
Date of creation: 27 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwpio:0303012

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  1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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  9. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
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  18. repec:fth:louvco:2000/6 is not listed on IDEAS
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Cited by:
  1. Crampes, Claude & Haritchabalet, Carole & Jullien, Bruno, 2006. "Advertising, Competition and Entry in Media Industries," IDEI Working Papers 374, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Choi, Jay Pil, 2006. "Broadcast competition and advertising with free entry: Subscription vs. free-to-air," Information Economics and Policy, Elsevier, vol. 18(2), pages 181-196, June.

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