Price Dispersion and Legacy Discounts in the National Television Advertising Market
39 Pages Posted: 28 Oct 2021 Last revised: 29 Aug 2022
Date Written: August 25, 2021
Advertising is an input for many final goods, and broadcast television comprises a significant portion of ad-spending in the U.S. Yet advertisers face different costs when purchasing national television ads. We seek to empirically confirm differences in firms’ costs to advertise nationally. Network-advertiser contracts are secret, so we combine data on ad placements and average prices of program airings to analyze price dispersion. We document that "legacy" advertisers with established broadcast relationships receive favorable prices for equivalent ad inventories. This may benefit incumbents and potentially soften price competition from newcomers in product markets.
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