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Public and Private Activity in Commercial TV Broadcasting

Author

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  • Hansen, Bodil O.

    (Department of Economics, Copenhagen Business School)

  • Keiding, Hans

    (Department of Economics, Copenhagen Business School)

Abstract

We consider a model of commercial television market, where private broadcasters coexist with a public television broadcaster. Assuming that the public TV station follows a policy of Ramsey pricing whereas the private stations are profit maximizers, we consider the equilibria in this market and compare with a situation where the public station is privatized and acts as another private TV broadcaster. A closer scrutiny of the market for commercial television leads to a distinction between target rating points, which are the prime unit of account in TV advertising, and net coverage, which is the final goal of advertisers. Working with net coverage as the fundamental concept, we exploit the models of competition between public and private price and quantity in order to show that privatization of the public TV station entails a welfare loss and results in TV advertising becoming more expensive.

Suggested Citation

  • Hansen, Bodil O. & Keiding, Hans, 2006. "Public and Private Activity in Commercial TV Broadcasting," Working Papers 02-2006, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2006_002
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    References listed on IDEAS

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    1. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Financing of Media Firms: Does Competition Matter?," Memorandum 01/2005, Oslo University, Department of Economics.
    2. Papandrea, Franco, 1997. "Modelling television programming choices," Information Economics and Policy, Elsevier, vol. 9(3), pages 203-218, September.
    3. Mangani, Andrea, 2003. "Profit and audience maximization in broadcasting markets," Information Economics and Policy, Elsevier, vol. 15(3), pages 305-315, September.
    4. Michael Spence & Bruce Owen, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 103-126.
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    Cited by:

    1. Germa Bel & Laia Domenech, 2009. "What Influences Advertising Price in Television Channels?: An Empirical Analysis on the Spanish Market," Journal of Media Economics, Taylor & Francis Journals, vol. 22(3), pages 164-183.

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    More about this item

    Keywords

    TV broadcasting; imperfect competition; Ramsey pricing; welfare comparison;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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