Advertising, Competition and Entry in Media Industries

41 Pages Posted: 5 Dec 2005

See all articles by Claude Crampes

Claude Crampes

Toulouse University

Carole Haritchabalet

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ)

Bruno Jullien

University of Toulouse 1 - Toulouse School of Economics (TSE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

This paper presents a model of media competition with free entry when media operators are financed both from advertisers and customers. The relation between advertising receipts and sales receipts, which are both complementary and antagonist, is different if media operators impose a price or a quantity to advertisers. When consumers dislike advertising, media operators are better off setting an advertising price than an advertising quantity. We establish a relationship between the equilibrium levels (advertising and entry) and the advertising technology. In particular, media operators' profit is not affected by the introduction of advertising when they impose advertising quantities and when advertising exhibits constant returns to scale in the audience size. Under constant or increasing returns to scale in the audience size, we find an excessive level of entry and an insufficient level of advertising.

Keywords: media, advertising, free entry, two-sided markets

JEL Classification: L13, L82

Suggested Citation

Crampes, Claude and Haritchabalet, Carole and Jullien, Bruno, Advertising, Competition and Entry in Media Industries (November 2005). CESifo Working Paper Series No. 1591. Available at SSRN: https://ssrn.com/abstract=863466

Claude Crampes

Toulouse University ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France

Carole Haritchabalet

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France

Bruno Jullien (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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