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TV Advertising, Program Quality, and Product-Market Oligopoly

  • Nilssen, Tore
  • Sørgard, Lars

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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Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number qt2zp943hj.

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Date of creation: 01 Apr 2000
Date of revision:
Handle: RePEc:cdl:compol:qt2zp943hj
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  1. Simon P. Anderson & Stephen Coate, 2000. "Market Provision of Public Goods: The Case of Broadcasting," NBER Working Papers 7513, National Bureau of Economic Research, Inc.
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  3. Tore Nilssen & Lars Sørgard, 1998. "Time Schedule and Program Profile: TV News in Norway and Denmark," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(2), pages 209-235, 06.
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  10. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, 2000. "TV-broadcasting competition and advertising," CORE Discussion Papers 2000006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Massimo Motta & Michele Polo, 1997. "Concentration and public policies in the broadcasting industry: the future of television," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 293-334, October.
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  16. Nilssen,T. & Sorgard,L., 2000. "Strategic informative advertising in a TV-advertising duopoly," Memorandum 17/2000, Oslo University, Department of Economics.
  17. Schmalensee, Richard, 1992. "Sunk Costs and Market Structure: A Review Article," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 125-34, June.
  18. Robinson, William T & Chiang, Jeongwen, 1996. "Are Sutton's Predictions Robust?: Empirical Insights into Advertising, R&D, and Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 389-408, December.
  19. Häckner, Jonas & Nyberg, Sten, 2000. "Price Competition, Advertising and Media Market Concentration," Research Papers in Economics 2000:3, Stockholm University, Department of Economics.
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  21. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
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