Negotiations and Exclusivity Contracts for Advertising

Anthony Dukes () and Esther Gal–Or ()
Additional contact information
Esther Gal–Or: Katz Graduate School of Business, University of Pittsburgh, 210 Mervis Hall, Pittsburgh, Pennsylvania 15260
Authors registered in the RePEc Author Service: Esther Gal-Or ()

Marketing Science, 2003, vol. 22, issue 2, 222-245

Abstract: Exclusive advertising on a given media outlet is usually profitable for an advertiser because consumers are less aware of competing products. However, for such arrangements to exist, media must benefit as well. We examine conditions under which such exclusive advertising contracts benefit both advertisers and media outlets (referred to as ) by illustrating that exclusive equilibria arise in a theoretical model of the media, advertisers, and consumers who participate in both the product and media markets. In the model, stations sell advertising space to advertisers and broadcast advertising messages to consumers. Conditions leading to higher equilibrium levels of advertising can be unprofitable for advertisers because high levels of advertising make consumers better informed and thus lead to fiercer product price competition. As a result, media stations may be less profitable as well because their payoff is determined as a fraction of the advertiser surplus generated in the product market. Stations mitigate this effect by offering advertisers exclusive advertising contracts. With such contracts, consumers are less informed about competing products, yielding higher producer surplus. It is profitable for stations to offer exclusivity when commercial advertising is an important means for advertisers to inform consumers about their products.

Keywords: Advertising; Market Structure; Media (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (84)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.22.2.222.16036 (application/pdf)

Related works:
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:inm:ormksc:v:22:y:2003:i:2:p:222-245

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().