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TV Advertising, Program Quality, and Product-Market Oligopoly

Author

Listed:
  • Tore Nilssen

    (Department of Economics, University of Oslo)

  • Lars Sørgard

    (Department of Economics, Norwegian School of Economics & Business Administration, Bergen, Norway)

Abstract

We present a model of the TV-advertising market that encompasses both the product markets and the market for TV programs. We argue that the TV industry has several idiosyncratic characteristics that need to be modeled, and show that the strategic interaction in this industry differs from other industries in many respects. We find that a move from a TV monopoly to a TV duopoly may reduce both the total number of viewers and the total amount of TV advertising. A softening of price competition in each product market results in more investment in program quality, higher price per advertising slot, and more advertising. A reduction of the number of firms in each product market may have the opposite effect if the price competition in the product market is sufficiently soft initially. Finally, we find that even small asymmetries between product markets can cause large asymmetries with respect to which producers buy advertising on TV.

Suggested Citation

  • Tore Nilssen & Lars Sørgard, 2003. "TV Advertising, Program Quality, and Product-Market Oligopoly," Industrial Organization 0303012, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0303012
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    References listed on IDEAS

    as
    1. Tore Nilssen & Lars Sørgard, 1998. "Time Schedule and Program Profile: TV News in Norway and Denmark," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(2), pages 209-235, June.
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    Cited by:

    1. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2005. "Advertising, Competition and Entry in Media Industries," CESifo Working Paper Series 1591, CESifo Group Munich.
    2. Choi, Jay Pil, 2006. "Broadcast competition and advertising with free entry: Subscription vs. free-to-air," Information Economics and Policy, Elsevier, vol. 18(2), pages 181-196, June.

    More about this item

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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