Quantity restrictions on advertising, commercial media bias, and welfare

Anna Kerkhof and Johannes Münster

Journal of Public Economics, 2015, vol. 131, issue C, 124-141

Abstract: We study the welfare effect of a quantity restriction on advertising in free-to-air television (and other advertising financed media) in the presence of commercial media bias. Broadcasters face a trade-off between increasing the number of viewers by sending content that is highly valued by viewers, and increasing the price of advertising by choosing advertiser friendly content. A cap on advertising drives the per-viewer price of ads up; thus, content improves for viewers. Therefore, the cap can be welfare enhancing, even when viewers are not ad averse. Competition among broadcasters makes it more likely that a cap on advertising improves welfare. Thus, there is a complementarity between regulation and competition on this market. We also show that a tax on advertising revenues has quite different effects than a cap on advertising quantity.

Keywords: Media bias; Advertising; Quantity restriction; Taxes; Two-sided markets (search for similar items in EconPapers)
JEL-codes: H23 H25 L13 L51 L82 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:131:y:2015:i:c:p:124-141

DOI: 10.1016/j.jpubeco.2015.09.004

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