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Advertising on TV: Under- or Overprovision?

Author

Listed:
  • Kind, Hans Jarle

    (Norwegian School of Economics and Business Administration)

  • Nilssen, Tore

    (Dept. of Economics, University of Oslo)

  • Sørgard, Lars

    (Norwegian Competition Authority)

Abstract

We consider a model where TV channels transmit advertising, and viewers dislike such commercials. We find that the less differentiated the TV channels’ programs are, the lower is the amount of advertising in equilibrium. Relative to the social optimum, there is underprovision of advertising if TV channels are sufficiently close substitutes. In such a situation, a merger between TV channels may lead to more advertising and thus improve welfare. A publicly owned TV channel can partly correct market distortions, in some cases by having a larger amount of advertising than a private TV channel. It may actually have advertising even in cases where it is wasteful per se

Suggested Citation

  • Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Advertising on TV: Under- or Overprovision?," Memorandum 15/2005, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2005_015
    as

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    References listed on IDEAS

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    14. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Financing of Media Firms: Does Competition Matter?," Memorandum 01/2005, Oslo University, Department of Economics.
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    Cited by:

    1. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    2. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    3. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics.
    4. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers in Economics 963, University of Munich, Department of Economics.
    5. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2005. "Financing of Media Firms: Does Competition Matter?," CIE Discussion Papers 2005-08, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    6. Richard Schmidtke, 2006. "Two–Sided Markets with Pecuniary and Participation Externalities," Working Papers 003, Bavarian Graduate Program in Economics (BGPE).
    7. Richard Schmidtke, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," CESifo Working Paper Series 1776, CESifo.
    8. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 133, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Simon P. Anderson, 2005. "Regulation of Television advertising," Virginia Economics Online Papers 363, University of Virginia, Department of Economics.
    10. Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 292-301, March.

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    More about this item

    Keywords

    Television industry; Advertising; Public policy; Mixed oligopoly;
    All these keywords.

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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