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How Effective are Advertising Bans? On the Demand for Quality in Two-Sided Media Markets

  • Tanja Greiner
  • Marco Sahm
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    We study a two-sided markets model of two competing television stations that offer content of differentiated quality to ad-averse consumers and advertising space to firms. As all consumers prefer high over low quality content, competition for viewers is vertical. By contrast, competition for advertisers is horizontal, taking into account the firms’ targeted advertising motive. We analyze the impact of both the strength of mutual externalities and advertisement regulation policies on the viewers’ equilibrium demand for high quality content. We find that, although consumers dislike advertisements, an advertising ban in the high quality medium reduces its viewer market share and thereby the equilibrium reception of high quality content.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-07/cesifo1_wp3524.pdf
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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3524.

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    Date of creation: 2011
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    Handle: RePEc:ces:ceswps:_3524
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    1. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    2. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2006. "Competition for Viewers and Advertisers in a TV Oligopoly," CESifo Working Paper Series 1862, CESifo Group Munich.
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    7. Hans Jarle Kind & Frank Stähler, 2009. "Market Shares in Two-Sided Media Industries," CESifo Working Paper Series 2737, CESifo Group Munich.
    8. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
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    14. Jean-Charles Rochet & Jean Triole, 2002. "Platform competition in two sided markets," LSE Research Online Documents on Economics 24929, London School of Economics and Political Science, LSE Library.
    15. Saffer, Henry & Chaloupka, Frank, 2000. "The effect of tobacco advertising bans on tobacco consumption," Journal of Health Economics, Elsevier, vol. 19(6), pages 1117-1137, November.
    16. Christos Kotsogiannis & Konstantinos Serfes, 2008. "Public Goods and Tax Competition in a Two-Sided Market," Discussion Papers 0808, Exeter University, Department of Economics.
    17. Frank, Mark W., 2008. "Media substitution in advertising: A spirited case study," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 308-326, January.
    18. Esther Gal-Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 291-325, 09.
    19. Hans Jarle Kind & Frank Stähler, 2010. "Market Shares in Two-Sided Media Industries," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 205-211, June.
    20. Anthony Dukes, 2004. "The Adverstising Market in a Product Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 52(3), pages 327-348, 09.
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