*The authors thank Simon Anderson, Mark Armstrong and Tommaso Valletti for comments and discussions, as well as seminar participants at Gremaq, University of Bologna, European University Institute, European Summmer Symposium in Economic Theory (Gersenzee), Université de Montpellier, the conference ‘Regulation of Media Market,’ (Toulouse), the Conference in Tribute to Jean-Jacques Laffont (Toulouse), the EARIE meeting and the JMA Conference. Two anonymous referees of the Journal have provided highly valuable comments.
ADVERTISING, COMPETITION AND ENTRY IN MEDIA INDUSTRIES*
Version of Record online: 20 FEB 2009
© 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 57, Issue 1, pages 7–31, March 2009
How to Cite
CRAMPES, C., HARITCHABALET, C. and JULLIEN, B. (2009), ADVERTISING, COMPETITION AND ENTRY IN MEDIA INDUSTRIES. The Journal of Industrial Economics, 57: 7–31. doi: 10.1111/j.1467-6451.2009.00368.x
- Issue online: 20 FEB 2009
- Version of Record online: 20 FEB 2009
This paper presents a model of media competition with free entry when media platforms are financed both from advertising receipts and customers' subscriptions. We establish a relationship between the equilibrium levels of prices, advertising and entry, the welfare maximizing levels and the advertising technology. Under constant or increasing returns to scale in the audience size, we find an excessive level of entry and an insufficient level of advertising. We then extend the analysis along several dimensions: the price as a strategic variable on the market for advertising, free media platforms and the media quality dimension.