The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV
Helmut Dietl,
Markus Lang and
Panlang Lin ()
No 153, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)
Abstract:
This paper develops a theoretical model of asymmetric competition between a pay TV and a free TV broadcaster. Our model shows that the pay TV broadcaster has incentives to place advertising on its channel if the marginal return on advertising exceeds the viewers' disutility from advertising. In this case, however, the pay TV advertising level is always below the corresponding level on free TV. The pay TV advertising level can increase with a higher viewer disutility from advertising but the pay TV channel will never attract a larger viewership than the free TV channel. Furthermore, we show that introducing advertising on pay TV induces a decrease of the subscription fees on this channel and a decrease in the advertising level of the free TV channel. Moreover, pay TV viewer demand can increase if the pay TV broadcaster places advertising on its channel. If the viewer disutility of advertising is sufficiently large, aggregate broadcaster profits increase through the introduction of advertising in pay TV, while aggregate consumer surplus always increases.
Keywords: Asymmetric competition; advertising; television broadcasting; media (search for similar items in EconPapers)
JEL-codes: D40 L10 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/153_ISU_full.pdf (application/pdf)
Related works:
Journal Article: The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV (2023) 
Working Paper: The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV (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:iso:wpaper:0153
Access Statistics for this paper
More papers in Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU) Contact information at EDIRC.
Bibliographic data for series maintained by IBW IT ().