How effective are advertising bans? On the demand for quality in two-sided media markets

Faculty/Professorship: Economic Theory  
Author(s): Greiner, Tanja; Sahm, Marco  
Title of the Journal: Information Economics and Policy
ISSN: 0167-6245
Publisher Information: Amsterdam : Elsevier
Year of publication: 2018
Volume: 43
Pages: 48-60
Language(s): English
DOI: 10.1016/j.infoecopol.2018.01.003
We study a two-sided markets model of two competing television broadcasters 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. Analyzing the impact of an advertising ban on the high quality medium, we derive the following results: (i) total advertising volumes decrease; (ii) the viewer market share of the high-quality broadcaster and thus the equilibrium reception of high quality content decreases; (iii) welfare decreases; (iv) the low-quality broadcaster’s profits will increase if and only if ad nuisance is small compared to ad effectiveness.
Keywords: Two-sided market, Advertising ban, Platform competition, Indirect network effect, Horizontal and vertical product differentiation
Peer Reviewed: Ja
International Distribution: Ja
Type: Article
Year of publication: 25. June 2018