Discussion paper

DP10608 Competition for advertisers and for viewers in media markets

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.