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Price Dispersion and Legacy Discounts in the National Television Advertising Market

Author

Listed:
  • Sylvia Hristakeva

    (UCLA Anderson School of Management, Los Angeles, California 90095)

  • Julie Holland Mortimer

    (Department of Economics, University of Virginia, Charlottesville, Virginia 22903; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

Advertising is an input for many final goods, and broadcast television comprises a significant portion of ad spending in the United States. Yet, advertisers face different costs when purchasing national television ads. We seek to empirically confirm differences in firms’ costs to advertise nationally. Network-advertiser contracts are secret, so we combine data on ad placements and average prices of program airings to analyze price dispersion. We document that “legacy” advertisers with established broadcast relationships receive favorable prices for equivalent ad inventories. This may benefit incumbents and potentially soften price competition from newcomers in product markets.

Suggested Citation

  • Sylvia Hristakeva & Julie Holland Mortimer, 2023. "Price Dispersion and Legacy Discounts in the National Television Advertising Market," Marketing Science, INFORMS, vol. 42(6), pages 1162-1183, November.
    • Handle: RePEc:inm:ormksc:v:42:y:2023:i:6:p:1162-1183
    DOI: 10.1287/mksc.2023.1442
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    References listed on IDEAS

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