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Getting beer during commercials: adverse effects of Ad-Avoidance

  • Stuehmeier, Torben
  • Wenzel, Tobias

This paper studies the impact of ad-avoidance behavior in media markets. We consider a situation where viewers can avoid advertisement messages. As the media market is a two-sided market, increased ad-avoidance reduces advertisers' value of placing an ad. We contrast two financing regimes, free-to-air and pay-TV. We find that increased avoidance opportunities decrease profits and entry in the free-to-air regime. In contrast, in the pay-TV regime, lower income from advertisements are compensated by higher subscription income leaving profits and the number of channels unaflected. Bypassing advertising messages affects welfare ambiguously.

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Paper provided by Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW) in its series IWQW Discussion Paper Series with number 10/2009.

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Date of creation: 2009
Date of revision:
Handle: RePEc:zbw:iwqwdp:102009
Contact details of provider: Web page: http://www.iwqw.rw.uni-erlangen.de/

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  1. Peitz, Martin & Valletti, Tommaso, 2004. "Content and Advertising in the Media: Pay-TV versus Free-To-Air," CEPR Discussion Papers 4771, C.E.P.R. Discussion Papers.
  2. Gu, Yiquan & Wenzel, Tobias, 2009. "Product variety, price elasticity of demand and fixed cost in spatial models," IWQW Discussion Paper Series 03/2009, Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).
  3. 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.
  4. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Programming and advertising competition in the broadcasting industry," CORE Discussion Papers RP -1873, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages F270-F307, 06.
  6. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
  7. Kaiser, Ulrich & Wright, Julian, 2004. "Price Structure in Two-sided Markets: Evidence from the Magazine Industry?," ZEW Discussion Papers 04-80, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  9. Gu, Yiquan & Wenzel, Tobias, 2009. "A note on the excess entry theorem in spatial models with elastic demand," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 567-571, September.
  10. Mangani, Andrea, 2003. "Profit and audience maximization in broadcasting markets," Information Economics and Policy, Elsevier, vol. 15(3), pages 305-315, September.
  11. Markus Reisinger & Ludwig Ressner & Richard Schmidtke, 2009. "TWO-SIDED MARKETS WITH PECUNIARY AND PARTICIPATION EXTERNALITIES -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 32-57, 03.
  12. Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 292-301, March.
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