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Programming and Advertising Competition in the Broadcasting Industry
Author(s) -
Gabszewicz Jean J.,
Laussel Didier,
Sonnac Nathalie
Publication year - 2004
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2004.00027.x
Subject(s) - advertising , competition (biology) , broadcasting (networking) , channel (broadcasting) , attendance , population , microeconomics , business , economics , telecommunications , computer science , biology , demography , sociology , computer network , ecology , economic growth
We analyze competition between two private television channels that derive their profits from advertising receipts. These profits are shown to be proportional to total population advertising attendance. The channels play a sequential game in which they first select their profiles (program mixes) and then their advertising ratios . We show that these ratios play the same role as prices in usual horizontal differentiation models. We prove that whenever ads' interruptions are costly for viewers the program mixes of the channels never converge but that the niche strategies are less effective and that the channel “profiles” are closer as advertising aversion becomes stronger.