Effects of TV airtime regulation on advertising quality and welfare

David Henriques

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper investigates how regulations that limit advertising airtime may affect advertising quality and social welfare. I show, first, conditions under which an advertising cap may reduce or improve the average quality of advertising broadcast on a free-to-air TV platform. Second, an advertising cap may reduce TV platform’s and firms’ profits, while the net effect on viewers’ welfare is ambiguous because the ad quality may decrease as a result of a regulatory cap offsetting the direct gain from watching fewer ads. The results suggest that a regulator that is trying to increase social welfare via regulation of the volume of advertising on TV should take the effect of advertising quality into consideration. Implementing an advertising cap without regard to ad quality may result in lower social welfare than leaving advertising airtime unregulated.

Keywords: advertising; ad quality; rRegulation; TV; two-sided markets (search for similar items in EconPapers)
JEL-codes: D62 M37 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2020-10-02
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Published in Information Economics and Policy, 2, October, 2020. ISSN: 0167-6245

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:106963

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