How Effective are Advertising Bans? On the Demand for Quality in Two-Sided Media Markets

34 Pages Posted: 26 Jul 2011

See all articles by Tanja Greiner

Tanja Greiner

affiliation not provided to SSRN

Marco Sahm

University of Munich

Date Written: July 26, 2011

Abstract

We study a two-sided markets model of two competing television stations that offer content of differentiated quality to ad-averse consumers and advertising space to firms. As all consumers prefer high over low quality content, competition for viewers is vertical. By contrast, competition for advertisers is horizontal, taking into account the firms’ targeted advertising motive. We analyze the impact of both the strength of mutual externalities and advertisement regulation policies on the viewers’ equilibrium demand for high quality content. We find that, although consumers dislike advertisements, an advertising ban in the high quality medium reduces its viewer market share and thereby the equilibrium reception of high quality content.

Keywords: horizontal and vertical product differentiation, two - sided externalities, advertising ban

JEL Classification: D210, L130, L510, L820

Suggested Citation

Greiner, Tanja and Sahm, Marco, How Effective are Advertising Bans? On the Demand for Quality in Two-Sided Media Markets (July 26, 2011). CESifo Working Paper Series No. 3524, Available at SSRN: https://ssrn.com/abstract=1895299 or http://dx.doi.org/10.2139/ssrn.1895299

Tanja Greiner

affiliation not provided to SSRN ( email )

Marco Sahm (Contact Author)

University of Munich ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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