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A Theory of Broadcast Media Concentration and Commercial Advertising

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  • Brendan M. Cunningham
  • Peter J. Alexander

Abstract

We analyze a model in which the interaction of broadcasters, advertisers, and consumers determines the level of nonadvertising broadcasting produced and consumed. Our main finding is that an increase in concentration in broadcast media industries may lead to a decrease in the total amount of nonadvertising broadcasting. The strength of this inverse relationship depends, in part, on the behavioral response of the consumers to changes in advertising intensities. We also present a numerical general equilibrium solution to our model and demonstrate a positive relationship between consumer welfare and the number of firms in the broadcast industry.

Suggested Citation

  • Brendan M. Cunningham & Peter J. Alexander, 2004. "A Theory of Broadcast Media Concentration and Commercial Advertising," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 557-575, October.
    • Handle: RePEc:bla:jpbect:v:6:y:2004:i:4:p:557-575
    DOI: 10.1111/j.1467-9779.2004.00180.x
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    Cited by:

    1. 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.
    2. Ohki, Kazuyoshi, 2021. "Should public broadcasting companies be continued, scrambled, disbanded or privatized?," MPRA Paper 106766, University Library of Munich, Germany.
    3. Maria Battaggion & Alessandro Vaglio, 2015. "Watchdogs, Platforms and Audience: An Economic Perspective on Media Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(2), pages 209-228, June.
    4. Ivaldi, Marc & Zhang, Jiekai, 2020. "Platform Mergers: Lessons from a Case in the Digital TV Market," CEPR Discussion Papers 14895, C.E.P.R. Discussion Papers.
    5. Richard Schmidtke, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," CESifo Working Paper Series 1776, CESifo.
    6. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    7. Marc Ivaldi & Jiekai Zhang, 2022. "Platform mergers: lessons from a case in the digital TV market," Post-Print hal-03881366, HAL.
    8. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 133, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Rennhoff, Adam D. & Wilbur, Kenneth C., 2012. "Local media ownership and media quality," Information Economics and Policy, Elsevier, vol. 24(3), pages 231-242.
    10. Ivaldi, Marc & Zhang, Jiekai, 2015. "Advertising Competition in the French Free-To-Air Television Broadcasting Industry," CEPR Discussion Papers 10762, C.E.P.R. Discussion Papers.
    11. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers in Economics 963, University of Munich, Department of Economics.
    12. Brendan M. Cunningham, 2005. "Censorship: the Key to Lock-In?," Departmental Working Papers 10, United States Naval Academy Department of Economics.
    13. Benoît Pierre Freyens & Chris Jones, 2014. "Efficient Allocation of Radio Spectrum," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 1-23, February.
    14. Reisinger, Markus, 2012. "Platform competition for advertisers and users in media markets," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 243-252.
    15. Amnon Levy & Michael R. Caputo & Benoît Pierre Freyens, 2013. "Royalties, Entry and Spectrum Allocation to Broadcasting," Economics Working Papers wp13-02, School of Economics, University of Wollongong, NSW, Australia.
    16. Marc Ivaldi & Jiekai Zhang, 2017. "Advertising Competition in the Free-to-Air TV Broadcasting Industry," CESifo Working Paper Series 6461, CESifo.

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