A Theory of Bundling Advertisements in Media Markets

41 Pages Posted: 3 Jan 2017

See all articles by Kevin M. Murphy

Kevin M. Murphy

University of Chicago; National Bureau of Economic Research (NBER)

Ignacio Isabel Palacios-Huerta

London School of Economics

Date Written: December 2016

Abstract

Watching TV and other forms of media consumption represent, after sleeping and working, the main activity that adults perform in developed countries. We present a dynamic theory of commercial broadcasting where the media trade utility-raising goods (programs, information, and services) with audiences in exchange for their exposure to advertisements (utility-decreasing bads), and where goods are otherwise free to the audience except for their opportunity cost of time. Goods and bads are dynamically arranged, and as such traded in an intertemporal bundle. No monetary transfers take place between media and audiences, and this barter exchange is not contractually sustained. We study this dynamic problem in a model that captures the central characteristics of how commercial media markets operate. The model is rich enough to account for a variety of disparate evidence in television, radio, print media and the web.

Suggested Citation

Murphy, Kevin M. and Palacios-Huerta, Ignacio Isabel, A Theory of Bundling Advertisements in Media Markets (December 2016). NBER Working Paper No. w22994. Available at SSRN: https://ssrn.com/abstract=2892418

Kevin M. Murphy (Contact Author)

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7280 (Phone)
773-702-2699 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ignacio Isabel Palacios-Huerta

London School of Economics ( email )

Dept. of Management
Houghton Street
London, WC2A 2AE
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
13
Abstract Views
166
PlumX Metrics