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Advertising on TV: Under- or Overprovision?

  • Kind, Hans Jarle


    (Norwegian School of Economics and Business Administration)

  • Nilssen, Tore


    (Dept. of Economics, University of Oslo)

  • Sørgard, Lars


    (Norwegian Competition Authority)

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

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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 15/2005.

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Length: 20 pages
Date of creation: 22 May 2005
Date of revision:
Publication status: Published in Journal of Media Economics, 2007, pages 211-233.
Handle: RePEc:hhs:osloec:2005_015
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page:

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  1. Barros Pedro P & Kind Hans Jarle & Nilssen Tore & Sørgard Lars, 2005. "Media Competition on the Internet," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-20, January.
  2. Massimo Motta & Michele Polo, 1997. "Concentration and public policies in the broadcasting industry: the future of television," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 293-334, October.
  3. Anthony Dukes, 2004. "The Adverstising Market in a Product Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 52(3), pages 327-348, 09.
  4. 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.
  5. repec:tpr:qjecon:v:103:y:1988:i:2:p:345-56 is not listed on IDEAS
  6. Nilssen, T. & Sorgard, L., 1998. "A Public Firm Challenged by Entry: Duplication of Diversity?," Papers 13/98, Norwegian School of Economics and Business Administration-.
  7. Esther Gal-Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 291-325, 09.
  8. Simon P. Anderson, 2005. "Regulation of Television advertising," Virginia Economics Online Papers 363, University of Virginia, Department of Economics.
  9. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
  10. Nilssen,T., 2000. "Risk externalities in a payments oligopoly," Memorandum 10/2000, Oslo University, Department of Economics.
  11. 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.
  12. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Financing of Media Firms: Does Competition Matter?," Memorandum 01/2005, Oslo University, Department of Economics.
  13. CREMER, Helmuth & MARCHAND, Maurice & THISSE, Jacques-François, . "Mixed oligopoly with differentiated products," CORE Discussion Papers RP 930, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. repec:tpr:qjecon:v:108:y:1993:i:4:p:941-64 is not listed on IDEAS
  15. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
  16. Nilssen, T. & Sorgard, L., 2000. "TV Advertising, Programming Investments, and Product-Market Oligopoly," Papers 6/2000, Norwegian School of Economics and Business Administration-.
  17. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
  18. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
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