Oligopoly in Advertiser-supported Media

Abstract:     
In this article advertiser supported media, such as television, are analyzed as an industry selling audiences to advertisers. A simple stylized model is used to demonstrate that increased competition leads to less of a price decline (in extreme cases, maybe even a price increase) than would be expected in other industries. This arises because audience diversion introduces terms similar to conjectural variations in equilibrium output. Further, in this model, it is shown that if greater competition makes advertisers better off, it makes media consumers worse off and vice versa. The extension to mixed subscriber-advertiser supported media is demonstrated to lead to similar, albeit attenuated, conclusions.

Keywords: Advertiser-supported media, oligopolistic competition

JEL Classifications: L82, D43, L13

Accepted Paper Series