Every Viewer has a Price - On the Differentiation of TV Channels

Jonas Häckner () and Sten Nyberg

No 2010:15, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: This study has three main objectives. First, we develop a realistic framework for studying the incentives to differentiate broadcasting in free-to-air TV markets. Consumers are allowed to vary the amount of time spent in front of the television set depending on preferences over program types (e.g., entertainment versus news), differences in the alternative cost of time and an Hotelling type dimension reflecting i.e., political positioning. Second, since empirical evidence suggest that different consumer segments are priced differently in the market for advertising, we analyze the implications of targeted advertising on the equilibrium level of differentiation. Third, we compare the equilibrium outcome with the socially optimal configuration. When consumers have no preferences over program types, standard Hotelling type results apply. Market forces minimize differentiation while the optimal degree is at an intermediate level. As preferences over program types get stronger the difference between optimal and market outcomes is initially reduced. However, when a large enough number of consumers start flipping between channels in order to avoid the least preferred program type, minimal differentiation suddenly becomes optimal while market forces leads to excessive differentiation. Hence, policies aimed at increasing diversity is beneficial only when viewers care little about program content.

Keywords: Product Differentiation; TV Channels; Advertising (search for similar items in EconPapers)
JEL-codes: L32 L82 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-09-03
New Economics Papers: this item is included in nep-com, nep-cul and nep-mkt
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www2.ne.su.se/paper/wp10_15.pdf (application/pdf)

Related works:
Journal Article: Every Viewer has a Price: On the Differentiation of TV Channels (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sunrpe:2010_0015

Access Statistics for this paper

More papers in Research Papers in Economics from Stockholm University, Department of Economics Department of Economics, Stockholm, S-106 91 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Anne Jensen ( this e-mail address is bad, please contact ).