Price Discrimination and Audience Composition in Advertising-Based Broadcasting

摘要

In this article, a model is introduced that has 2 distinguishing features. First, the multidimensional nature of competition in media markets characterized by free access and advertising is acknowledged, through explicit modeling of vertical and horizontal differentiation. Second, the price of advertising depends on the expected audience composition, not simply on its magnitude, and the amount of price discrimination. It is found that market equilibria depend on a number of critical factors: the amount and type of price discrimination in advertising, the correlation between formats and audience composition, the relative profitability of the different market segments, and diseconomies of scale in program quality. For a variety of market structures, the ability to discriminate on the price of advertising encourages a higher level of quality in broadcast media.