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The impact of advertising length caps on TV: Evidence from the French broadcast TV industry

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  • Jiekai ZHANG

    () (INSEE-CREST, 150 Boulevard Gabriel Péri, 92245 MALAKOFF, France)

Abstract

The quantities of advertising on TV are regulated in France, as in many other developed countries. This paper aims at understanding the welfare implication of such regulation. It is the first paper which investigates this issue with a structural econometric model in two-sided market framework. I construct an unique database of per hour data on 12 main broadcast TV stations in France during one year (2014) to estimate structurally the demand and supply in the French broadcast television industry. I identify the shadow prices of regulation caps on advertising quantities, using the difference in estimated marginal costs between the binding and non-binding regulation constraints. A counterfactual experiment is carried out to quantify the exact impact of regulation. The results suggest that the TV channels advertise more without regulation but the overall impact of the current regulatory regime is small. The welfare analysis suggests that the current regulation framework is unnecessary, since it constrained the profit of TV channels without improving significantly the welfare of TV viewers.

Suggested Citation

  • Jiekai ZHANG, 2016. "The impact of advertising length caps on TV: Evidence from the French broadcast TV industry," Working Papers 16-06, NET Institute.
  • Handle: RePEc:net:wpaper:1606
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    File URL: http://www.netinst.org/Zhang_16-06.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Advertising; regulation; media; TV; two-sided market; structural estimation; shadow prices; welfare;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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