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Programming and advertising competition in the broadcasting industry

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  • GABSZEWICZ, Jean J.
  • LAUSSEL, Didier
  • SONNAC, Nathalie

Abstract

We analyze competition between two private television channels that derive their profits from advertising receipts. These profits are shown to be proportional to total population advertising attendance. The channels play a sequential game in which they first select their profiles (program mixes) and then their advertising ratios. We show that these ratios play the same role as prices in usual horizontal differentiation models. We prove that whenever ads' interruptions are costly for viewers the program mixes of the channels never converge but that the niche strategies are less effective and that the channel “profiles” are closer as advertising aversion becomes stronger.
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Suggested Citation

  • GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, 2004. "Programming and advertising competition in the broadcasting industry," LIDAM Reprints CORE 1873, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1873
    DOI: 10.1016/j.ejor.2007.02.031
    Note: In : Journal of Economics & Management Strategy, 13(4), 657-669, 2004
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    File URL: http://dx.doi.org/10.1016/j.ejor.2007.02.031
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    References listed on IDEAS

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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.
    2. Jack H. Beebe, 1977. "Institutional Structure and Program Choices in Television Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(1), pages 15-37.
    3. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2002. "Press Advertising and the Political Differentiation of Newspapers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 317-334, July.
    4. Peter O. Steiner, 1952. "Program Patterns and Preferences, and the Workability of Competition in Radio Broadcasting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(2), pages 194-223.
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