IDEAS home Printed from https://ideas.repec.org/p/hhs/iuiwop/0789.html
   My bibliography  Save this paper

Paying to Remove Advertisements

Author

Listed:
  • Tåg, Joacim

    () (Research Institute of Industrial Economics (IFN))

Abstract

Media firms sometimes allow consumers to pay to remove advertisements from an advertisement-based product. We formally examine an ad-based monopolist's incentives to introduce this option. When deciding whether to introduce the option to pay, the monopolist compares the potential direct revenues from consumers with lost advertising revenues from not intermediating those consumers to advertisers. If the option is introduced, the media firm increases advertising quantity to make the option to pay more attractive. This hurts consumers, but benefits the media firm and advertisers. Total welfare may increase or decrease. Perhaps surprisingly, more annoying advertisements may lead to an increase in advertising quantity.

Suggested Citation

  • Tåg, Joacim, 2009. "Paying to Remove Advertisements," Working Paper Series 789, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0789
    as

    Download full text from publisher

    File URL: http://www.ifn.se/wfiles/wp/wp789.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    2. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2005. "Advertising, Competition and Entry in Media Industries," CESifo Working Paper Series 1591, CESifo Group Munich.
    3. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    4. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
    5. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    6. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    7. Hansen, Claus Thustrup & Kyhl, Soren, 2001. "Pay-per-view broadcasting of outstanding events: consequences of a ban," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 589-609, March.
    8. Raymond Chiang & Chester S. Spatt, 1982. "Imperfect Price Discrimination and Welfare," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 155-181.
    9. Steven Salop, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 393-406.
    10. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
    11. Greenstein, Shane & Ramey, Garey, 1998. "Market structure, innovation and vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 285-311, May.
    12. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Programming and Advertising Competition in the Broadcasting Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 657-669, December.
    13. Raymond J. Deneckere & R. Preston McAfee, 1996. "Damaged Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(2), pages 149-174, June.
    14. Holden, Steinar, 1993. "Network or pay-per-view? : A welfare analysis," Economics Letters, Elsevier, vol. 43(1), pages 59-64.
    15. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simon P. Anderson & Joshua S. Gans, 2011. "Platform Siphoning: Ad-Avoidance and Media Content," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 1-34, November.
    2. Dietl, Helmut & Lang, Markus & Lin, Panlang, 2013. "Advertising pricing models in media markets: Lump-sum versus per-consumer charges," Information Economics and Policy, Elsevier, vol. 25(4), pages 257-271.

    More about this item

    Keywords

    Advertising; Damaged goods; Media markets; Price discrimination; Two-sided markets; Vertical differentiation;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0789. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson). General contact details of provider: http://edirc.repec.org/data/iuiiise.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.