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The Market for Television Advertising: Model and Evidence

  • Robert Kieschnick

    (University of Texas at Dallas)

  • B. McCullough

    (Drexel University)

  • Steven Wildman

    (Michigan State University)

We provide a model of television advertising based on an explicit characterization of an advertisement's contribution to an advertiser's profits that suggests that each program faces a downward sloping demand for its ad time. Hence Fournier and Martin's (1983) "law of one price" does not hold in our model. We study these contrasting arguments about television advertising by examining the pricing of broadcast network advertising. In conducting this empirical examination we encounter and solve a severe multicollinearity problem. We conclude that the evidence supports the advertising model presented in this paper and demonstrates segmentation between cable and broadcast viewers in the national television advertising market.

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Paper provided by Berkeley Electronic Press in its series Review of Marketing Science Working Papers with number 1-2-1015.

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Date of creation: 01 Nov 2001
Date of revision:
Handle: RePEc:bep:rmswpp:1-2-1015
Note: oai:bepress:roms-1015
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  1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  2. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  3. Chaudhri, Vivek, 1998. "Pricing and efficiency of a circulation industry: The case of newspapers," Information Economics and Policy, Elsevier, vol. 10(1), pages 59-76, March.
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