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Pricing Power in Advertising Markets: Theory and Evidence

Author

Listed:
  • Matthew Gentzkow
  • Jesse M. Shapiro
  • Frank Yang
  • Ali Yurukoglu

Abstract

Existing theories of media competition imply that advertisers will pay a lower price in equilibrium to reach consumers who multi-home across competing outlets. We generalize and extend this theoretical result and test it using data from television and social media advertising. We find that the model is a good match, qualitatively and quantitatively, to variation in advertising prices across demographic groups, outlets, platforms, and over time. We use the model to quantify the effects of competition within and across platforms.

Suggested Citation

  • Matthew Gentzkow & Jesse M. Shapiro & Frank Yang & Ali Yurukoglu, 2024. "Pricing Power in Advertising Markets: Theory and Evidence," American Economic Review, American Economic Association, vol. 114(2), pages 500-533, February.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:2:p:500-533
    DOI: 10.1257/aer.20220943
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    Cited by:

    1. Guy Aridor & Rafael Jiménez-Durán & Ro'ee Levy & Lena Song, 2024. "The Economics of Social Media," CESifo Working Paper Series 10934, CESifo.
    2. Guy Aridor & Yeon-Koo Che, 2024. "Privacy Regulation and Targeted Advertising: Evidence from Apple’s App Tracking Transparency," CESifo Working Paper Series 10928, CESifo.
    3. Bisceglia, Michele, 2023. "The unbundling of journalism," European Economic Review, Elsevier, vol. 158(C).

    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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