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TV Advertising, Program Quality, and Product-Market Oligopoly

  • Tore Nilssen

    (Department of Economics, University of Oslo)

  • Lars Sørgard

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

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.

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Paper provided by EconWPA in its series Industrial Organization with number 0303012.

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Length: 2 pages
Date of creation: 27 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwpio:0303012
Note: 2 pages, Adobe.pdf
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  1. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
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  5. repec:cup:cbooks:9780521498715 is not listed on IDEAS
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  18. Nilssen,T. & Sorgard,L., 2000. "Strategic informative advertising in a TV-advertising duopoly," Memorandum 17/2000, Oslo University, Department of Economics.
  19. Massimo Motta & Michele Polo, 2001. "Beyond the Spectrum Constraint: Concentration and Entry in the Broadcasting Industry," Rivista di Politica Economica, SIPI Spa, vol. 91(4), pages 115-150, April-May.
  20. Goettler, R., 1999. "Advertising Rates, Audience Composition, and Competition in the Network Television Industry," GSIA Working Papers 1999-28, Carnegie Mellon University, Tepper School of Business.
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