DP10608 Competition for advertisers and for viewers in media markets

Author(s): Simon P Anderson, Øystein Foros, Hans Jarle Kind
Publication Date: May 2015
Keyword(s): genre choice, incremental ad pricing, media bias, media economics, multi-homing, overlap
JEL(s): D11, D60, L13
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10608

Standard models of advertising-financed media assume consumers patronize a single media platform, precluding effective competition for advertisers. Such competition ensues if consumers multi-home. The principle of incremental pricing implies that multi-homing consumers are less valuable to platforms. Then entry of new platforms decreases ad prices, while a merger increases them, and ad-financed platforms may suffer if a public broadcaster carries ads. Platforms may bias content against multi-homing consumers, especially if consumers highly value overlapping content and/or second impressions have low value.