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Getting beer during commercials: adverse effects of Ad-Avoidance

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  • Stuehmeier, Torben
  • Wenzel, Tobias

Abstract

This paper studies the impact of ad-avoidance behavior in media markets. We consider a situation where viewers can avoid advertisement messages. As the media market is a two-sided market, increased ad-avoidance reduces advertisers' value of placing an ad. We contrast two financing regimes, free-to-air and pay-TV. We find that increased avoidance opportunities decrease profits and entry in the free-to-air regime. In contrast, in the pay-TV regime, lower income from advertisements are compensated by higher subscription income leaving profits and the number of channels unaflected. Bypassing advertising messages affects welfare ambiguously. --

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Bibliographic Info

Paper provided by Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW) in its series IWQW Discussion Paper Series with number 10/2009.

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Date of creation: 2009
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Handle: RePEc:zbw:iwqwdp:102009

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Web page: http://www.iwqw.rw.uni-erlangen.de/
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Keywords: Media Markets; Two-Sided Markets; Ad-avoidance;

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References

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  1. Yiquan Gu & Tobias Wenzel, 2009. "Product Variety, Price Elasticity of Demand and Fixed Cost in Spatial Models," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0092, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Yiquan Gu & Tobias Wenzel, 2007. "A Note on the Excess Entry Theorem in Spatial Models with Elastic Demand," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0033, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Mangani, Andrea, 2003. "Profit and audience maximization in broadcasting markets," Information Economics and Policy, Elsevier, Elsevier, vol. 15(3), pages 305-315, September.
  4. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(1), pages 1-28, January.
  5. Prasad, A. & Mahajan, V. & Bronnenberg, B.J.J.A.M., 2003. "Advertising versus pay-per-view in electronic media," Open Access publications from Tilburg University urn:nbn:nl:ui:12-332538, Tilburg University.
  6. Choi, Jay Pil, 2006. "Broadcast competition and advertising with free entry: Subscription vs. free-to-air," Information Economics and Policy, Elsevier, Elsevier, vol. 18(2), pages 181-196, June.
  7. Markus Reisinger & Ludwig Ressner & Richard Schmidtke, 2009. "TWO-SIDED MARKETS WITH PECUNIARY AND PARTICIPATION EXTERNALITIES -super-* ," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 57(1), pages 32-57, 03.
  8. Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(2), pages 292-301, March.
  9. Crampes, Claude & Haritchabalet, Carole & Jullien, Bruno, 2006. "Advertising, Competition and Entry in Media Industries," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 374, Institut d'Économie Industrielle (IDEI), Toulouse.
  10. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Programming and Advertising Competition in the Broadcasting Industry," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 13(4), pages 657-669, December.
  11. 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.
  12. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(538), pages F270-F307, 06.
  13. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(4), pages 949-965, July.
  14. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. When ad avoidance backfires
    by Economic Logician in Economic Logic on 2010-02-11 15:04:00
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Cited by:
  1. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, Elsevier, vol. 115(1), pages 7-10.
  2. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, De Gruyter, vol. 11(2), pages 1-23, June.
  3. Christin, Clémence, 2011. "Entry deterrence through cooperative R&D over-investment," DICE Discussion Papers 38, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  5. Stühmeier, Torben, 2012. "Target Advertising and Market Transparency," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62021, Verein für Socialpolitik / German Economic Association.

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