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The Impact of Consumer Multi-homing on Advertising Markets and Media Competition

Author

Listed:
  • Athey, Susan

    (Stanford University)

  • Calvano, Emilio

    (University of Bologna)

  • Gans, Joshua S.

    (University of Toronto)

Abstract

We develop a model of advertising markets in an environment where consumers may switch (or "multi-home") across publishers. Consumer switching generates inefficiency in the process of matching advertisers to consumers, because advertisers may not reach some consumers and may impress others too many times. We find that when advertisers are heterogeneous in their valuations for reaching consumers, the switching-induced inefficiency leads lower-value advertisers to advertise on a limited set of publishers, reducing the effective demand for advertising and thus depressing prices. As the share of switching consumers expands (e.g., when consumers adopt the internet for news or increase their use of aggregators), ad prices fall. We demonstrate that increased switching creates an incentive for publishers to invest in quality as well as extend the number of unique users, because larger publishers are favored by advertisers seeking broader "reach" (more unique users) while avoiding inefficient duplication.

Suggested Citation

  • Athey, Susan & Calvano, Emilio & Gans, Joshua S., 2016. "The Impact of Consumer Multi-homing on Advertising Markets and Media Competition," Research Papers 3407, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:3407
    as

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    References listed on IDEAS

    as
    1. Alexandre Cornière & Greg Taylor, 2014. "Integration and search engine bias," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 576-597, September.
    2. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
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    Citations

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    Cited by:

    1. Larbi Alaoui & Fabrizio Germano, 2012. "Time scarcity and the market for news," Economics Working Papers 1348, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2014.
    2. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
    3. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    4. Batikas, Michail & Claussen, Jörg & Peukert, Christian, 2017. "Follow The Money: Piracy and Online Advertising," 28th European Regional ITS Conference, Passau 2017 169448, International Telecommunications Society (ITS).
    5. Anna D'Annunzio & Antonio Russo, 2017. "Ad Networks, Consumer Tracking, and Privacy," CESifo Working Paper Series 6667, CESifo Group Munich.
    6. Anderson, Simon P. & Jullien, Bruno, 2016. "The advertising-financed business model in two-sided media markets," TSE Working Papers 16-632, Toulouse School of Economics (TSE).
    7. Hans Jarle Kind & Marko Köthenbürger, 2016. "Taxation in Digital Media Markets," CESifo Working Paper Series 6202, CESifo Group Munich.
    8. Emilio Calvano & Mihele Polo, 2016. "Strategic Differentiation by Business Models: Free-to-Air and Pay-TV," CSEF Working Papers 438, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 07 Nov 2017.
    9. Szech, Nora & Schweizer, Nikolaus, 2015. "Revenues and Welfare in Auctions with Information Release," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113041, Verein für Socialpolitik / German Economic Association.
    10. Nikolaus Schweizer & Nora Szech, 2015. "Revenues and Welfare in Auctions with Information Release," CESifo Working Paper Series 5501, CESifo Group Munich.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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