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Exclusive vs Overlapping Viewers in Media Markets

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  • Ambrus, Attila
  • Reisinger, Markus

Abstract

This paper investigates competition for advertisers in media markets when viewers can subscribe to multiple channels. A central feature of the model is that channels are monopolists in selling advertising opportunities toward their exclusive viewers, but they can only obtain a competitive price for advertising opportunities to multi-homing viewers. Strategic incentives of firms in this setting are different than those in former models of media markets. If viewers can only watch one channel, then firms compete for marginal consumers by reducing the amount of advertising on their channels. In our model, channels have an incentive to increase levels of advertising, in order to reduce the overlap in viewership. We take an account of the differences between the predictions of the two types of models and find that our model is more consistent with recent developments in broadcasting markets. We also show that if channels can charge subscription fees on viewers, then symmetric firms can end up in an asymmetric equilibrium in which one collects all or most of its revenues from advertisers, while the other channel collects most of its revenues via viewer fees.

Suggested Citation

  • Ambrus, Attila & Reisinger, Markus, 2006. "Exclusive vs Overlapping Viewers in Media Markets," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 161, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:161
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    File URL: https://epub.ub.uni-muenchen.de/13390/1/161.pdf
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    References listed on IDEAS

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    1. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    2. Brown, Keith & Alexander, Peter J., 2005. "Market structure, viewer welfare, and advertising rates in local broadcast television markets," Economics Letters, Elsevier, vol. 86(3), pages 331-337, March.
    3. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
    4. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
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    Cited by:

    1. Matthew Gentzkow & Jesse M. Shapiro, 2015. "Ideology and Online News," NBER Chapters,in: Economic Analysis of the Digital Economy, pages 169-190 National Bureau of Economic Research, Inc.
    2. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," Discussion Papers 2012/9, Norwegian School of Economics, Department of Business and Management Science.
    3. Alexander Rasch, 2007. "Platform competition with partial multihoming under differentiation: a note," Economics Bulletin, AccessEcon, vol. 12(7), pages 1-8.
    4. D'Annunzio, Anna & Russo, Antonio, 2015. "Net Neutrality and internet fragmentation: The role of online advertising," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 30-47.
    5. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2014. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," American Economic Review, American Economic Association, vol. 104(10), pages 3073-3114, October.
    6. Simon Loertscher & Gerd Muehlheusser, 2008. "Dynamic Location Games," Department of Economics - Working Papers Series 1042, The University of Melbourne.
    7. Antonio Russo & Anna D'Annunzio, 2013. "Network Neutrality, Access to Content and Online Advertising," KOF Working papers 13-344, KOF Swiss Economic Institute, ETH Zurich.
    8. repec:ebl:ecbull:v:12:y:2007:i:7:p:1-8 is not listed on IDEAS
    9. Elena Panova, 2009. "Confirmatory News," Cahiers de recherche 0912, CIRPEE.

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